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- Privacy Policies and Rules Whether an RIA is SEC or state-registered, the firm must have policies and procedures in effect to protect clients privacy. Policies and procedures should explicitly require an RIA to send out its privacy notice each year.
- Client Commission Practices and Soft Dollars RIAs should always evaluate whether the products and services they receive from broker-dealers are appropriate. The SEC suggested that an RIAs failure to stay within the scope of the Section 28(e) safe harbor may violate the advisors fiduciary duty to clients, so RIAs must evaluate their soft dollar relationships on a regular basis to ensure they are disclosed properly and that they do not negatively impact the best execution of clients transactions.
The anti-retaliation provisions of Dodd-Frank don’t apply abroad, according to a federal appeals court decision on Thursday.
In the decision, the 2nd Circuit Court of Appeals granted the motion to dismiss a case brought by Meng-Lin Liu, a former compliance officer at Siemens China, who said he was retaliated against for reporting alleged wrongdoing.
The 2010 Dodd‐Frank Wall Street Reform and Consumer Protection Act includes a provision that prohibits employers from retaliating against whistleblower employees who make certain protected disclosures — but doesn’t specify if this applies abroad.
“We conclude that that provision does not apply extraterritorially,” the Thursday opinion says, citing a 2010 U.S. Supreme Court decision that says that legislation does not apply abroad unless there is evidence Congress indicated otherwise. The opinion also states that “because Liu’s complaint alleges that he was a non‐citizen employed abroad by a foreign company, and that all events allegedly giving rise to liability occurred outside the United States, applying the anti-retaliation provision to these facts would constitute an extraterritorial application of the statute.”
The ruling upholds an earlier ruling by a New York district court judge that Liu appealed.
In an interview with ThinkAdvisor, Thomas Gorman, a partner at international law firm Dorsey Whitney, said the court made it very clear how focused and limited this case was: a foreign worker employed abroad by a foreign corporation where all events related to the disclosures occurred abroad.
Because of the very limited extent of this case, Gorman said of the ruling, “I think it’s difficult to judge how big of an impact this case will have at this point in time.” He added that because everything was overseas, he didn’t think this case would have an effect on domestic cases.
The one effect it could have, Gorman added, is how a whistleblower reports a tip.
“I think one question that might come out of this for a whistleblower is whether or not to report internally or through the SEC, where you would receive protection,” Gorman said.
Liu, who accused his firm of firing him after he raised concerns internally, submitted a tip to the Securities and Exchange Commission program after he left Siemens China, according to court documents. The appeals court, like the district court, refrained from weighing in on whether or not Liu was disqualified from whistleblower protection because he did not report the suspected wrongdoing to the SEC until he was fired.
Last year the 5th Circuit Court of Appeals said employees had to report to the SEC in order to be protected from retaliation as whistleblowers under Dodd-Frank.
The SEC filed an amicus brief in support of Liu, saying that individuals who report suspected wrongdoing internally at a company or to the Commission can both be protected from retaliation.
From the whistleblower program's inception in August 2011 until the end of fiscal 2013, the SEC has received 6,573 tips and complaints from whistleblowers, according to the Office of the Whistleblower’s annual report.
Of the 3,238 whistleblower tips and complaints in the 2013 fiscal year, 12% of the tipsters submitted information from abroad, the Wall Street Journal reported, citing the Commission. The SEC’s whistleblower program received tips from individuals in 55 foreign countries, especially he United Kingdom, Canada and China according to the Commission.
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