A federal whistleblower law prohibiting retaliation against those who raise concerns about securities law violations does not protect employees who work overseas for U.S.-based companies, a U.S. appeals court ruled on Friday.
A three-judge panel of the U.S. Court of Appeals for the D.C. Circuit unanimously rejected a bid by a former top Asia-based lawyer for Morgan Stanley to revive claims that he was pressured into resigning in 2016 after reporting alleged illegal activities, many of which occured outside of the U.S.
Christopher Garvey had argued that the Sarbanes–Oxley Act of 2002 (SOX), which protects workers who report securities violations, dually applies to securities fraud that occurs overseas but affects markets in the United States.
The D.C. Circuit disagreed, stating SOX’s whistleblower protections do not prohibit securities fraud, so any impact on the U.S. markets was irrelevant in applying the precedent. The panel further clarified that SOX created protections for employees, so the pivotal question is whether they are based in the United States.
The 1st Circuit in Boston and 2nd in New York came to the same conclusion in their rulings.
According to court filings, Garvey served as the executive director of a legal and compliance division for Morgan Stanley subsidiaries based in Japan and Hong Kong from 2006 to 2016, claiming he was expelled from his role after he reported alleged corruption and other violations to his superiors.
Following his departure, Garvey...
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