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Court Rules Whistleblowers May Disclose Confidential Information to SEC

A federal judge in San Diego has ruled that whistleblowers may receive protection if they release confidential information to the U.S. Securities and Exchange Commission (SEC) as part of an investigation into potential fraud.

In her ruling, U.S. District Judge Cynthia Bashant denied most of a motion for summary judgment from BofI Federal Bank’s attorneys, who wanted the court to remove protections from one of its former internal auditors.

The auditor worked for the bank since September 2013, and he went to the SEC with information after he discovered the company had illegally dealt with an unregistered dealer of securities. He also claimed BofI was out of compliance with SEC reporting requirements.

Attorneys for BofI argued that by forwarding the information to the SEC, the auditor was sharing confidential client information and other data. This would be a violation of the Computer Fraud and Abuse Act and the company’s internal non-disclosure agreement, which the auditor signed.

‘Reasonably necessary’

BofI filed a lawsuit against the auditor, who countersued the company for whistleblower retaliation. The district court’s ruling mostly sided with the auditor, with the judge stating that public policy favors whistleblower who report fraud to the SEC and other federal government agencies. The judge added that the auditor could disclose confidential information if it was “reasonably necessary” for him to do so in reporting the fraud.

If you are aware of potential fraud or wrongdoing within a business or government agency, you may be able to report it and receive certain protections. For further guidance, meet with a skilled Dallas attorney at Whistleblower Law for Managers.

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