Academic journal article Notre Dame Law Review

A Textual Analysis of Whistleblower Protections under the Dodd-Frank Act

Academic journal article Notre Dame Law Review

A Textual Analysis of Whistleblower Protections under the Dodd-Frank Act

Article excerpt


In the aftermath of the 2008 financial crisis, Congress enacted and President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank"). (1) The purpose of Dodd-Frank was "[t]o promote the financial stability of the United States by improving accountability and transparency in the financial system." (2) One mechanism Dodd-Frank's drafters crafted for improving accountability in the financial system was a comprehensive whistleblower incentives and protections program. (3) Dodd-Frank's whistleblower program followed in the footsteps of previous remedial legislation--namely the Sarbanes-Oxley Act ("SOX") (4)--with the intention that Dodd-Frank would "build on existing legislation to remedy the aftermath of the 2008 financial crisis, and provide strong compliance and reporting incentive structures to prevent future market failures." (5)

Since its enactment, Dodd-Frank has avoided the main difficulties in application that whistleblowers under SOX experienced--i.e., questions of "who" within an organization may be classified as a whistleblower. (6) However, circuits have split on the question of "what" a whistleblower must do in order to receive Dodd-Frank's antiretaliation protections. The controversy has turned on the interaction between two specific provisions of Dodd-Frank. The first provision is the section that defines the term "whistleblower" for the purposes of the whistleblower provisions--15 U.S.C. [section] 78u-6(a)(6). (7) The definitional section states: "In this section the following definitions shall apply: ... The term 'whistleblower' means any individual who provides ... information relating to a violation of the securities laws to the Commission." (8) The second provision is the section that outlines the Act's antiretaliation protections for whistleblowers--15 U.S.C. [section] 78u-6(h) (1) (A). (9) It provides:

No employer may discharge, demote, suspend, threaten, harass, directly or indirectly, or in any other manner discriminate against, a whistleblower in the terms and conditions of employment because of any lawful act done by the whistleblower--

(i) in providing information to the Commission in accordance with this section;

(ii) in initiating, testifying in, or assisting in any investigation or judicial or administrative action of the Commission based upon or related to such information; or

(iii) in making disclosures that are required or protected under the Sarbanes- Oxley Act of 2002 (15 U.S.C. 7201 et seq.), this chapter, including section 78j-1(m) of this title, section 1513(e) of title 18, and any other law, rule, or regulation subject to the jurisdiction of the Commission. (10)

In Asadi v. G.E. Energy (USA), L.L.C., the Fifth Circuit held that the plain language of Dodd-Frank's whistleblower definition and antiretaliation provision restricted the law's protections "to those individuals who provide 'information relating to a violation of the securities laws' to the SEC." (11) In contrast, the Second Circuit held in Berman v. Neo@Ogilvy LLC that the tension between Dodd-Frank's whistleblower definition and its antiretaliation provision "renders [the whistleblower provisions] as a whole sufficiently ambiguous to oblige us to give Chevron deference to" the SEC's interpretation that internal reporting is sufficient to invoke the statute's protections. (12)

This Note endorses the reasoning of the Fifth Circuit, and argues that the plain language of Dodd-Frank limits its whistleblower protections to individuals who provide information to the SEC. This Note argues that the reasoning of the Second Circuit relying on the Supreme Court's decision in King v. Burwell is inapposite, and that the Second Circuit introduced ambiguity where no ambiguity previously existed and improperly extended Chevron deference to the SEC. (13) Part 1 briefly describes the interpretive rule adopted by the SEC, as well as the reasoning of the Fifth Circuit in Asadi and the Second Circuit in Berman. …

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