The Sarbanes Oxley Act Of 2002

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I. The Regulatory Backdrop
Over the years Congress has acknowledged and agreed that more needs to be done to incentivize and protect whistleblowers. In the early 2000s, following major accounting scandals, Congress passed the Sarbanes-Oxley Act of 2002 (“SOX”). Then several years later, following more major financial scandals and plummeting of the United States economy into the Great Recession of 2008, Congress passed the Dodd-Frank Act. This section will briefly describe each of these Acts as they provide background for the dispute.
A. Round One: The Sarbanes-Oxley Act of 2002
Following the massive Enron and WorldCom scandals, Congress enacted SOX. SOX’s purpose is “[t]o protect investors by improving the accuracy and reliability of
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Whistleblowers who meet these criteria must state a prima facie case, which must first show that they “engaged in a protected activity.” However, SOX limits protected activity to an employee who “provide[s] information . . . regarding any conduct which the employee reasonably believes constitutes a violation of section 1341 [mail fraud], 1343 [wire fraud], 1344 [bank fraud] or 1348 [securities fraud], any rule or regulation of the Securities and Exchange Commission, or any provision of Federal law relating to fraud against shareholders.” If an employee can prove that they engaged in a protected activity, then they can then proceed through the rest of the required elements to make their claim.
To file a claim, whistleblowers must first file with the Secretary of Labor. The Secretary of Labor has 180 days to make a decision, and only if that time lapses can the whistleblower file their complaint directly with the court. Regardless of which way the case is filed, if the plaintiff succeeds relief includes “all [that is] necessary to make the employee whole.” Thus, relief includes “reinstatement with seniority, back pay with interest, and costs.” It is important to point out that while SOX provides protection for whistleblowers, it does not provide any kind of incentives for employees to blow the whistle in the first place.
B. Round 2: The Dodd-Frank Act
However, SOX was not the end of the story. 2008 ushered in, what is now
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