SEC Asserts Congress Intended SOX to Protect Employees of Consolidated Subsidiaries of Publicly-Traded Companies

The Securities and Exchange Commission (SEC) filed an amicus curiae brief asserting that Congress intended Section 806 of the Sarbanes-Oxley Act (SOX) to protect whistleblowers working for consolidated subsidiaries of publicly-traded companies.  The SEC states:

The [SEC] believes that the whistleblower protections of Section 806 apply not only to employees of parent companies that file financial reports with the [SEC], but also to employees of their non-public subsidiaries whose results are required to be included in their parent’s consolidated financial statements.  Thus, the [SEC] agrees with the [Administrative Law Judge] decisions in [Morefield v. Exelon Services, Inc.] and [Walters v. Deutsche Bank AG]. This interpretation is also consistent with the clarifying amendment recently adopted by Congress as Section 929A of the Dodd-Frank Act of 2010.

…

[D]espite the fact that subsidiaries are not expressly listed as covered entities, the language, purpose and structure of the statute indicate that they should be viewed as part of the same “company”….  [I]n covering reporting companies, Congress wished to encourage whistleblowing concerning violations that could render the financial statements of those companies inaccurate or misleading. It is clear from the [SEC’s] requirements concerning consolidated subsidiaries that misconduct at a consolidated subsidiary could lead to defects in the parent’s financials filed with the [SEC], so it is reasonable to conclude that Congress intended the protections to extend to employees of the subsidiaries.

The employment lawyers at The Employment Law Group® law firm have substantial experience representing employees in Sarbanes-Oxley whistleblower proceedings and have written numerous articles about the whistleblower provisions of the Sarbanes-Oxley Act.  For more information about TELG’s Sarbanes-Oxley Whistleblower Practice, click here.

Tagged: Sarbanes-Oxley Act (SOX), Whistleblower Laws (Federal)