On July 17, 2013, the Fifth Circuit Court of Appeals ruled that an ex-employee of a regulated entity, who internally reported alleged violations of the Foreign Corrupt Practices Act (FCPA) but failed to provide the information to the SEC, is not entitled to “whistleblower” status under Dodd-Frank, 15 U.S.C. § 78u-6(a)–(h), and is therefore cut-off from an anti-retaliation lawsuit and possible recovery of enhanced back pay. In rendering its decision, the Court explicitly rejected the SEC’s own interpretation of the statute, set forth in a final SEC Rule. The Court also rejected the decisions of the federal district courts that have considered the issue.
This has tremendous implications, at least in cases arising in the Fifth Circuit, both for employees and their regulated employers. Employees who want to be treated as a Dodd-Frank whistleblower and take advantage of its enhanced protections will have to provide information to the SEC of violations by the former employer. That means that the SEC will be involved much earlier in any internal corporate investigations that may be taking place. This is a bad idea for two reasons.
First, it undermines the extensive statutory and regulatory scheme already in place, which is designed to encourage companies to conduct rigorous internal investigation and then self-report to the SEC and/or DOJ. For example, under the Sentencing Guidelines, the DOJ’s Principals of Federal Prosecution of Business Organizations, and the SEC’s Cooperation Initiative, “cooperation” credit may be awarded for self-reporting. Under Asadi, however, corporations may be forced to race to the SEC or DOJ before an employee does without the benefit of knowing if something wrongful has actually occurred.
Second, the rule in Asadi, if widely adopted, has the potential to undo the detailed compliance programs painstakingly put into place by in-house counsel and compliance officers for internal reporting, review, analysis, and disclosure to the government. If Asadi becomes the law of the land, corporate law and compliance departments will have to substantially overhaul those programs and deal with the uncertainty that it injects into the compliance realm.
 See Asadi v. G.E. Energy (USA), LLC, No. 12-20522, 2013 WL 3742492 (5th Cir. July 13, 2013).
 See 17 C.F.R. § 240.21F-2(b)(1).
 See, e.g., Kramer v. Trans-Lux Corp., 2012 WL 4444820, at *4 (D. Conn. Sept. 25, 2012); Nollner v. S. Baptist Convention, Inc., 852 F. Supp. 2d 986, 994 n. 9 (M.D. Tenn. 2012); Egan v. TradingScreen, Inc., 2011 WL 1672066, at **4-5 (S.D.N.Y. May 4, 2011).
 Such persons are still, however, entitled to a private cause of action for retaliation under Sarbanes-Oxley. See 18 U.S.C. § 1514A.