Sarbanes-Oxley Act Overview
Passed in 2002, the Sarbanes-Oxley Act aims to protect investors from fraudulent corporate accounting activities. SOX sets forth standards and regulations for corporate financial reports, and it allows for certain protections for employees who report violations of these regulations (whistleblowers). Though forbidden, many whistleblowers often fall victim to retaliatory practices by their employer or co-workers once they’ve reported suspected wrongdoing. The dedicated employment lawyers at Tully Rinckey, PLLC can help you recuperate losses you’ve experienced after suffering an adverse employment action resulting from reporting suspected fraud activity. Our team of employment attorneys across New York have many years of experience fighting for the rights of corporate whistleblowers.
Sarbanes-Oxley Legal Requirements
SOX Section 404
SOX Section 404 dictates that all publicly traded companies establish internal accounting controls and reporting methods for evaluating the appropriateness of the controls. Every time an Annual Report is released, the report must include an internal control report assessing the efficacy of the accounting controls.
SOX Section 302
Section 302 of the Sarbanes-Oxley Act places the burden of accuracy of public financial statements on a company’s Chief Executive Officer and Chief Financial Officer. With Sarb-Ox, CEOs and CFOs must certify the accuracy of all financial statements released to the public. These senior leadership members are also responsible for all accounting documentation and submitting all financial reports to the Securities and Exchange Commission (SEC).
SOX Section 802
This section of the Sarbanes-Oxley Act prohibits the destruction and alteration of any document that could be used in an official proceeding. Attempting to alter, destroy, or conceal such documentation is a federal crime under SOX Section 802.
SOX Whistleblower Protections
While the Sarbanes-Oxley Act is aimed at financial fraud protection, there are also provisions in place that help encourage employees to come forward and report suspected SOX violations. Just as The Americans with Disabilities Act and Title IX make it illegal to retaliate or discriminate against someone based on their age, race, religion, gender, sex, or disability status, it is against the law for an employer to retaliate against an employee who, in good faith, has come forward with information regarding suspected fraud.
Specifically, 18 U.S.C. §1514A deals with whistleblower protection against retaliation in fraud cases. Under this statute, it is against the law to retaliate against an employee who provides information regarding what the employee believes to constitute shareholder fraud, brank fraud, securities fraud, mail fraud, wire fraud, or any other violation of SEC rule.
Retaliation may take the form of demotion, suspension, termination, harassment, or making threats against any employee who provides information regarding a suspected SOX violation. It is important to note that whistleblowers do not have to report actual fraud to be protected. So long as the whistleblower reasonably believes that the conduct reported constitutes fraud, or the conduct may lead to fraud, the employee is protected from adverse action.
SOX Legal Representation
To win a SOX whistleblower retaliation case, it must be demonstrated by a preponderance of the evidence that:
- The whistleblower engaged in a protected activity (reporting suspected fraud or activities that could lead to fraudulent activity).
- The employer knew of the protected activity.
- The whistleblower suffered an adverse employment action; and
- The protected activity played a role in the adverse employment action.
