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SEC Urges Third Circuit to Adopts Its Interpretation of Whistleblower Retaliation Protections

Last week, the Securities and Exchange Commission submitted an amicus brief in support of an appellant before the US Court of Appeals for the Third Circuit, urging the court to adopt its interpretation of whistleblower anti-retaliation protections set forth in Section 21F of the Securities Exchange Act of 1934. Section 21F, created by the Dodd-Frank Wall Street Reform and Consumer Protection Act, directs the SEC to pay monetary awards to individuals who report securities violations to the SEC and prohibits employers from retaliating against whistleblowers. A New Jersey district court dismissed appellant’s complaint in April, holding that the anti-retaliation provisions do not protect individuals who only report violations internally. 

In 2011, in an effort to clarify Section 21F, the SEC implemented rules explaining that all employees engaged in whistleblower activities benefitted from the anti-retaliation provision, not merely those whistleblowers who reported violations to the SEC. In its brief, the SEC argued that a contrary interpretation could reduce the effectiveness of a company’s existing internal processes for investigating and responding to securities violations, and would thus weaken corporate compliance with the securities laws. The SEC asked the court to defer to its 2011 rules pursuant to Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). 

Safarian v. American DG Energy Inc., No. 14-2734 (3d Cir. 2014). 

©2020 Katten Muchin Rosenman LLPNational Law Review, Volume IV, Number 355


About this Author


Margaret McQuade concentrates her practice on matters of employment law and executive compensation, with an emphasis on negotiating and drafting a wide range of agreements, and mediating and arbitrating claims on behalf of both employees and employers.