In the wake of Dodd-Frank’s passage in July 2010, many companies and corporate organizations lobbied the SEC on its upcoming whistleblower rules. One of their specific goals was to require whistleblowers, to be eligible for the awards provided in the statute, to report potential securities violations to internal compliance departments before bringing them to the Commission. Ultimately, the SEC didn’t go along. In writing the various provisions of Rule 21F, it built in a number of incentives to encourage internal reporting, but didn’t require it. Years later, there’s something of a disconnect between this push for internal reporting and the whistleblower rule’s anti-retaliation provisions. In brief, some companies are arguing in litigation that the anti-retaliation provisions don’t apply unless whistleblowers goes directly to the SEC with their tips. Put another way, if the whistleblower makes securities law allegations to an internal corporate compliance department, the companies cannot be constrained by the anti-retaliation provisions as it deals with the whistleblower. This position has prevailed in one federal circuit, Asadi v. G.E. Energy (USA), LLC, 720 F.3d 620 (5th Cir. 2013), and the issue is pending in another, Berman v. Neo@Ogilvy LLC, 14-4626 (2d Cir.). It’s a little odd in that the position that’s in the best interest of an individual company in specific litigation may not be in the best interest of public companies generally. That is, an individual company wants to stop a lawsuit against it however it can. But more broadly, companies still want to encourage their employees to report potential securities violations internally before racing off to the SEC. And if the Asadi position spreads to other circuits, and internal reporters are deemed not to have the protection of the anti-retaliation provisions, they won’t make internal reports. They’ll do what’s in their self-interest, and go to the SEC directly. The SEC’s position is that the anti-retaliation provisions do apply to whistleblowers who make internal reports. They’ve said as much in amicus briefs, and on August 4th the Commission issued an Interpretation of the SEC’s Whistleblower Rules under Section 21F of the Securities Exchange Act of 1934. The interpretation reaffirms this position, and is plainly designed to guide courts that consider the issue, including the Second Circuit in the upcoming Berman case. As the issue unfolds, Companies may be pulling for the SEC to prevail in its interpretation, even if they would be fighting tooth and nail against it if they were facing the question in litigation.