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: Jim Hamilton's World of Securities Regulation

By James Hamilton

Chevron Deference May Be Due Sarbanes-Oxley Whistleblower Ruling

A Fifth Circuit panel has ruled that a securities analyst did not engage in protected activity under the Sarbanes-Oxley Act whistleblower provision when she refused to upgrade a company?s rating in her report since she never said that changing the rating would violate any securities laws and the employer did not express an intent to change the rating, but merely questioned her decision. Getman v. US Dept. of Labor, Administrative Review Board, CA-5, Feb. 13, 2008, No. 07-60509.

In a per curiam unpublished opinion, the appeals court said that it appears that Chevron deference is due to the Department of Labor in interpreting the Sarbanes-Oxley whistleblower provision, Section 806. This was dicta since the court said that, either with or without Chevron deference, the decision of the Department of Labor that the activity was not protected under Section 806 would be upheld. But it was an important statement because the issue of Chevron deference under Section 806 has not been addressed before, at least in the Fifth Circuit.

The Chevron doctrine was promulgated by the US Supreme Court and is a powerful principle of administrative law. The doctrine means that, when Congress has explicitly left a gap for an agency to fill, there is an express delegation of authority to the agency to elucidate a specific provision of the statute by regulation, and any ensuing regulation is binding in the courts unless procedurally defective, arbitrary or capricious in substance, or manifestly contrary to the statute. In Section 806, Congress specifically authorized the Department of Labor to enforce the whistleblower provision.

Full post as published by Jim Hamilton's World of Securities Regulation on March 12, 2008 (boomark / email).