If financial advisors spot wrongdoing at their firms and want to report it, they should be prepared to go straight — and maybe only — to the SEC, say lawyers who advise whistleblowers.

Attorneys reached this conclusion after the U.S. Supreme Court last month raised higher barriers around who could claim protection under the whistleblower anti-retaliation provisions of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.

“It’s going to be harder,” warns Yosef Peretz, a lawyer who represents Claudia Ponce de Leon, a Wells Fargo branch manager who claimed she was fired for blowing the whistle on employees who had been opening accounts without permission.

Ponce de Leon’s allegations were part of Wells Fargo’s sales-pressure scandal that grabbed headlines first in 2016. In January this year, she settled with Wells Fargo, which agreed to pay her $577,500 in back wages, damages and legal fees.

Ponce de Leon and Wells Fargo reached their deal before the nation’s high court ruling in February.

For other whistleblowers, including financial advisors, with Dodd-Frank-related claims still pending — or for those who may pursue future ones — the high court’s decision has changed the game, according to the lawyers.

Surprisingly, lawyers on both sides of these cases — those who represent whistleblowers and those who defend employers — express disappointment with the high court’s ruling.

In its ruling on the case, Digital Realty Trust, Inc. v. Somers, the justices clarified that courts could offer no protections against employers’ retaliation against whistleblowers who report wrongdoing only to company officials — and not to the SEC, the federal government-level watchdog of the financial-service industry.

“I would have always recommended that you cover all your bases,” when flagging wrongdoing, says Peretz. In other words, his recommendation to whistleblowers had always been to report wrongdoing to both the company and the SEC.

But now it’s imperative that whistleblowers go first to the SEC. “You don’t want to take chances.” says Peretz. “You are already going upstream. There are massive forces against you.”

In some instances, the SEC will agree to keep a whistleblower’s identity confidential for a set period of time during the investigation, Peretz says. But whistleblowers’ identities rarely stay secret.

There are a couple of reasons for that. Often the alleged wrongdoing they report would only be known to a few individuals. And as soon as the SEC begins investigating, the firms typically get to work ferreting out the whistleblower’s identity, Peretz says.

For William Black, who co-founded Bank Whistleblowers United, the Supreme Court ruling “has done something very harmful for this business.”

Black, a professor of economics and law at the University of Missouri in Kansas City and a former bank regulator who helped expose the Keating Five in the Savings and Loan Scandal 30 years ago, says the ruling de-claws Dodd-Frank. Among other things, that law was meant to encourage employees to blow whistles internally first — and that’s how the SEC has been reading it ever since.

But with its ruling — which Black considers “antithetical to the entire industry” — the high court adhered to its “plain meanings” ideology about reading statutory language, even though their conclusion, in Black’s view at least, “is absurd.”

So what is Black’s advice for a potential whistleblower? Go to the SEC, but “assume your employer’s retaliation is pretty much a certainty,” he says.

Immediate employer retaliation in the form of getting fired isn’t the worst in store for whistleblowers either, says Black. “Likely,” an FA who makes an official claim of wrongdoing “will never work in the industry again.”

That’s why Black, whose Whistleblowers United organization advocates for financial-service employees who want to tell on their employers, says he never advises “anyone to blow the whistle unless it’s possible in your individual economic circumstances to do so.”

Brian Hoffman

With the specter of retaliation looming so large, and the stakes so high, Black says it makes sense for whistleblowers to go not just first to the SEC, but “exclusively” — skipping the reveal to employers altogether.

The high court’s ruling is “a mixed bag for employers,” according to Brian Hoffman and Jeremy Merkelson, Washington, D.C.-based lawyers at Holland & Hart, which represents financial-service employers.

In a Feb. 21 blog post, the attorneys say the Supreme Court “decision is good news for employers because the ruling narrows the scope of protections available under Dodd-Frank’s anti-retaliation provisions” but that “ there are many reasons for employers to be wary of the ruling.”

Specifically, Hoffman and Merkleson warn firms that the new ruling means employees have no incentive to report concerns internally “before employers have had the chance to hear, investigate, and address their potential concerns.”

As a result, employers should “remain vigilant about avoiding retaliation when reports about potential concerns arise” and engage “in a timely and proactive response to potential concerns, often in consultation with outside counsel and which may include an appropriate and comprehensive investigation and remediation of the matter.”