The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd Frank) amended the whistleblower provision in Section 806 of the Sarbanes-Oxley Act of 2002 (SOX) to state that pre-dispute arbitration agreements that require arbitration of a dispute arising under that section are invalid and unenforceable, and that Section 806 rights cannot be waived through a pre-dispute arbitration agreement or otherwise. In recognition of this amendment, the Financial Industry Regulatory Authority (FINRA) amended Rule 13201 of the Code of Arbitration Procedure for Industry Disputes to state: “a dispute arising under a whistleblower statute that prohibits the use of pre-dispute arbitration agreements is not required to be arbitrated under the Code.” And the amendment goes on to clarify that: “[s]uch a dispute may be arbitrated only if the parties have agreed to arbitrate it after the dispute arose.” On May 21, 2012, the Securities and Exchange Commission approved FINRA’s amendment to Rule 13201 through Regulatory Notice 12-21.
Likewise, FINRA is amending Rule 2263 to add a disclosure provision stating that a dispute arising under a whistleblower statute that prohibits the use of pre-dispute arbitration agreements is not required to be arbitrated under FINRA rules, and that such a dispute only may be arbitrated if the parties have so agreed after the dispute arose.
As a result of this amendment, employers should be sure to revise their arbitration agreements to omit whistleblower claims under statutes that prohibit the use of pre-dispute arbitration agreements, including Section 806 of SOX.