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Court allows securities strategist's retaliatory discharge case

When a mortgage-backed securities strategist at the global financial services UBS AG was told to publish what he thought were misleading research reports, he complained to his managers. In return, he says, he was fired in retaliation for reporting the illegal conduct in violation of whistleblower protection provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

When he filed a wrongful termination lawsuit, however, UBS said he hadn't properly invoked the Dodd-Frank Act's whistleblower protections because he only complained to the company -- he didn't report them to the Securities and Exchange Commission.

A federal judge in Manhattan has just ruled that the former securities strategist can move forward with his case, and that the Dodd-Frank Act does, indeed, apply.

Dodd-Frank was passed in 2010 in response to the financial crisis that started in 2008 and revealed a great deal of illegal, unethical and poorly-conceived conduct by the nation’s largest financial institutions. The whistleblower protections of the law are essential to encourage industry insiders to tell federal regulators about any such practices as soon as possible so they can be addressed before they have a negative impact on the economy.

When the application of those whistleblower protections was challenged, the SEC put a new rule in place to make absolutely clear that it people could not be fired in retaliation for reporting illegal conduct, even if they didn’t qualify for that protection under the Sarbanes-Oxley Act.

This ruling for the securities strategist is one of only a handful that have tested Dodd-Frank and the SEC rule, but those rulings have uniformly held that retaliatory discharge can be challenged in court under Dodd-Frank. According to a New York securities lawyer who has been closely following litigation in this area, this is the fifth time a federal court has ruled that Dodd-Frank protects whistleblowers, even if they only lodge internal complaints.

“The decision is a definitive rebuke to repeated and concerted efforts to dismantle broad protections for whistle-blowers that Congress provided in Dodd-Frank,” he said.

Securities industry employers, the message is clear: whistleblower protection is essential to good public policy, and it will be enforced under the Dodd-Frank Act.

Source: Thomson Reuters News & Insight, "Ex-strategist can sue UBS as whistleblower - U.S. judge," Nate Raymond, May 22, 2013

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