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From Securities Law Daily, May 22, 2013

Whistleblower Anti-Retaliation Protections Also Apply to Reports to Authorities Other Than the SEC

By Rodney F. Tonkovic, J.D.

A motion to dismiss a complaint brought by a former employee of UBS Securities, LLC was denied by a district court. The employee, Trevor Murray, alleged that UBS Securities, LLC and its parent company, UBS AG, (collectively, UBS) violated the whistleblower-protection provisions of the Dodd-Frank Act by terminating him in retaliation for making disclosures that were protected under the Sarbanes-Oxley Act’s whistleblower provision (Murray v. UBS Securities, LLC, May 21, 2013, Furman, J.).

Murray was employed as a Senior Commercial Mortgage-Backed Security Strategist and was responsible for researching and creating reports about UBS’s commercial mortgage-backed security (CMBS) products that were distributed to current and potential clients. In this position, he received nothing but positive performance reviews. Murray alleged that UBS personnel responsible for CMBS trading engaged in a concerted effort to influence him to skew his research in ways that were “more favorable” to UBS and that he was instructed not to publish any negative results.

Murray repeatedly told his manager about these attempts to influence his research in late 2011 and early 2012. After a performance review in January 2012, Murray's manager told him that he should write “what the business line wanted.” Murray was fired in February 2012.

Whistleblowers. Murray alleged that UBS violated Exchange Act Section 21F(h)(1)(A) by firing him in retaliation for reporting to his superiors that he was being pressured to produce false and misleading research reports about UBS’s securities products in violation of SEC rules. UBS countered that “whistleblower” is defined under Section 21F(a)(6) as a party providing information about a violation of the securities laws to the Commission. UBS, therefore, argued that Section 21F(h)(1)(A) applies only to a party providing information to the SEC, something Murray did not do. Murray asserted that Section 21F(h)(1)(A)(iii) provides an exception that protects an employee who makes disclosures required under SOX.

The court noted that four other cases confronting this issue sided with Murray’s reading of the statute. Moreover, the Commission has issued Rule 21F-2, which clarifies that the anti-retaliation protections also apply to individuals reporting to “persons or governmental authorities other than the Commission.” [emphasis in original].

The court then concluded that the SEC’s rule warranted Chevron deference. According to the court, Rule 21F-2 clarified the ambiguity between 21F(a)(6) and the broader scope of protection under Section 21F(h)(1)(A)(iii). Under the rule, a plaintiff is required to show that he or she either provided information to the SEC or that the disclosures fell under the categories listed in Section 21F(h)(1)(A)(iii). Here, the court found that Murray indisputably alleged that his termination was motivated by his making disclosures protected under SOX Section 806. Murray thus stated a claim, and the motion to dismiss was denied.

The case is 12 Civ. 5914 (JMF).

Attorneys: Michael Howard Isaac (Broach & Stulberg, LLP) for Trevor Murray. Daniel Patrick Rathbun (Gibson, Dunn & Crutcher) for UBS Securities, LLC.

Companies: UBS Securities, LLC

MainStory: TopStory DoddFrankAct NewYorkNews SarbanesOxleyAct

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