Academic journal article Washington and Lee Law Review

Whistling Loud and Clear: Applying Chevron to Subsection 21F of Dodd–Frank †

Academic journal article Washington and Lee Law Review

Whistling Loud and Clear: Applying Chevron to Subsection 21F of Dodd–Frank †

Article excerpt

Table of Contents

I. Introduction.................. 514

II. Subsection 21F in the Scheme of Securities Laws................... 520

A. The Language of Subsection 21F................... 520

B. Anti-Retaliation Protections Under Sarbanes-Oxley................... 521

C. The Structure of Dodd-Frank's and SOX's Anti-Retaliation Protections Vary Significantly.................. .523

III. Development of the Circuit Split................... 528

A. The SEC's Interpretive Rule................... 528

B. The Fifth Circuit Takes on the SEC: The Asadi Case................... 530

C. Criticism of the Asadi Decision: Setting the Stage for the Second Circuit................... 535

D. The Second Circuit Weighs in: The Berman Case................... 537

E. The Ninth Circuit's View: The Somers Case................... 542

F.The Chevron Two-Step.544

IV. The Path Forward.547

A. Dodd-Frank is Clear: Employing Chevron to Resolve the Split . 547

B. What Went Wrong? Explaining Berman's Reasoning.550

C. Policy Considerations: What if the Correct Legal Answer is Bad Policy?.555

V. Conclusion.559

VI. Postscript: Chevron in the Post-Somers Landscape.560

I.Introduction

In 2008, the United States financial system was brought to its knees, and many now regard the 2008 financial crisis as one of the worst, if not the worst, financial and economic crises in global history.1 In September of that year, the federal government, in an attempt to stabilize the U.S. housing market, seized control of Fannie Mae and Freddie Mac.2 At the time, Fannie Mae and Freddie Mac owned or guaranteed approximately half of the nation's twelve trillion dollar mortgage market,3 and-according to then-Treasury Secretary Henry Paulson-"a failure of either of them would cause great turmoil in our financial markets here at home and around the globe."4 In addition, Lehman Brothers, one of the largest and most prestigious financial firms in the world, filed for bankruptcy protection.5 Further, financial services and wealth management giant Merrill Lynch agreed to sell itself to Bank of America for a fraction of its overall value.6 As if these events were not enough to indicate an economic throttling, the U.S. government agreed to bail out insurance mammoth AIG at a price tag of $85 billion.7 Ultimately, the economic tailspin prompted the government to enact the Emergency Economic Stabilization Act of 2008,8 a $700 billion bailout of the financial services industry.9

With a purpose "[t]o promote the financial stability of the United States by improving accountability and transparency in the financial system, to end 'too big to fail', to protect the American taxpayer by ending bailouts, [and] to protect consumers from abusive financial services practices," Congress enacted the DoddFrank Wall Street Reform and Consumer Protection Act (DoddFrank).10 Dodd-Frank amended the Securities Exchange Act of 193411 (Exchange Act) to include certain whistleblower protections against employer retaliation under subsection 21F.12 Among these protections are prohibitions against discharge, demotion, suspension, harassment, threatening, and discrimination against whistleblowers.13 For the purposes of Dodd-Frank, Congress unambiguously and expressly defined a "whistleblower" as "any individual who provides, or 2 or more individuals acting jointly who provide, information relating to a violation of the securities laws to the Commission, in a manner established, by rule or regulation, by the Commission."14 The meaning of "Commission" is equally unambiguous under Dodd-Frank; it is defined as "the Securities and Exchange Commission."15 Thus, it is necessary for a person or persons to report misconduct to the Securities and Exchange Commission (SEC) to receive whistleblower status and protections under Dodd-Frank.

This Note addresses a circuit court split arising from a portion of the anti-retaliation provisions. …

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