August 27, 2013 /24-7PressRelease/
-- For many investors, the stock market crash of 2008 will always remain fresh in their minds. After all, it isn't common for investors to face trillion dollar market losses in a single day - that's right, trillion with a "t."
Sadly, the stock market crash - in addition to high-profile fraud schemes such as the one involving Bernie Madoff - made many investors begin to question how such pervasive fraud and uncertainty could exist in the heavily-regulated financial industry. Consequently, it became readily apparent in the wake of this financial collapse that whistleblower protection laws
are essential if the Securities and Exchange Commission (SEC) ever hopes to ferret out securities fraud.
Whistleblower laws are extremely helpful as many securities frauds would not be unearthed unless insiders reported them, which is why the Supreme Court's decision to hear a case regarding whistleblower protections under Sarbanes-Oxley is so important. This particular case, otherwise known as Lawson v. FMR LLC, may ultimately determine if contractors and subcontractors are entitled to whistleblower protections under Sarbanes-Oxley - which could have instant ramifications given the number of contractors working in the financial industry.
Lawson v. FMR LLC and its potential impact on whistleblower law
Generally, federal whistleblower laws - such as the one codified in the Sarbanes-Oxley Act - protects employees from employer retaliation if a particular employee reports employer wrongdoing or fraud to federal regulators. Specifically, Sarbanes-Oxley
dictates that public companies cannot fire, demote, suspend, harass or other discriminate against an employee if the employee provides information or assists in investigations regarding company violations of SEC regulations or fraud against investors.
In the case before the Supreme Court, Lawson v. FMR LLC, two people allege that they were subject to unlawful retaliation by their employers; however, the catch was that they were actually employees of a privately held investment advisor firm and not a public company. In fact, the "public company" in question was a mutual fund, which, as with most mutual funds, does not have any employees of its own. Mutual funds instead contract with investment advisors to manage the funds. Consequently, a federal appellate court determined that since the employees actually worked for contractors and not the public company, they were not entitled to whistleblower protection under Sarbanes-Oxley, which led to the appeal to the Supreme Court.
In court documents filed with the Supreme Court, it was argued that most whistleblowers would be deprived of protective under Sarbanes-Oxley in the mutual fund industry since "[v]irtually all of the workers in [this] industry are employed, not by the funds, but by investment advisors, and many of the advisors themselves are privately held companies."
If the Supreme Court ultimately determines that these contractors are not entitled to whistleblower protection, it is quite possible that many other "contractors" will be less likely to come forward and report fraud. Alternatively, it the court decides to extend Sarbanes-Oxley protections to contractors of mutual funds, these employees may have several remedies at their disposal if they are retaliated against following their participation in federal investigations. For instance, the employee can seek back pay, with interest, as well reinstatement to their former position. In addition, the employee can ask the court for special damages, such as litigation costs, expert witness fees and reasonable attorney fees.
This case demonstrates the intricacies of the whistleblower protection laws in the securities industry, which is why it is often best to seek the advice of an experienced whistleblower protection attorney if you believe you may have been retaliated against following the reporting of wrongdoing or fraud by your employer.
Article provided by Stavros Law, P.C.
Visit us at www.stavroslaw.com/