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Our Take Blog

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Our Take Blog
Fund Service Provider Employees Do Not Get SOX Whistleblower Protection

Fund Service Provider Employees Do Not Get SOX Whistleblower Protection

The United States Court of Appeals for the First Circuit has ruled that employees of a public mutual fund’s service providers are not entitled to Sarbanes-Oxley whistleblower protection.  The plaintiffs had claimed retaliation for raising issues concerning a mutual fund for whom their employers provided advisory and other services.  The court concluded that Sarbanes-Oxley only protected employees of the public company (i.e. the fund) and not employees of private companies that provide services to the public company.  The Court relied on statutory language and legislative history and disregarded SEC and OSHA interpretations. 
OUR TAKE: As a matter of principle, we agree with the Court that Sarbanes-Oxley was not intended to cover employees of service providers.  However, the question becomes more difficult in the fund context where the public company only operates through service providers.  We expect to hear more about this issue from other courts and possibly the Supreme Court.
http://www.ca1.uscourts.gov/cgi-bin/getopn.pl?OPINION=10-2240P.01A
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