Under the Sarbanes-Oxley Act (SOX), specifically Section 806, certain activities are considered protected whistleblowing. These activities generally involve employees of publicly traded companies reporting concerns about fraud or violations of federal securities laws. Protected whistleblowing activities under SOX include:
Providing Information or Assisting in Investigations
Employees are protected when they provide information or assist in an investigation regarding conduct that they reasonably believe constitutes a violation of federal securities laws, SEC rules, or other federal laws related to fraud against shareholders. This includes participating in internal investigations or investigations by federal regulatory or law enforcement agencies, Congress, or a person with supervisory authority over the employee.
Reporting Fraud
Reporting fraud or violations related to financial disclosures, accounting practices, or other activities that affect the financial performance or governance of the company.
Testifying in Proceedings
Employees are protected when they testify, participate, or otherwise assist in a proceeding filed or about to be filed (with any knowledge of the employer) relating to an alleged violation of federal securities laws or fraud against shareholders.
Making Internal Complaints
Reporting concerns internally to supervisors, managers, or other persons within the organization who have authority to investigate, discover, or terminate misconduct.
To be considered protected, the employee’s belief that a violation has occurred must be subjectively and objectively reasonable. This means the employee must genuinely believe there is a violation (subjective reasonableness), and this belief must be reasonable in light of the circumstances (objective reasonableness).
Examples of Protected Whistleblowing Activities
Here are some specific examples to help you understand what constitutes protected whistleblowing under SOX:
Financial Reporting
Disclosing that your company is issuing false financial reports to deceive investors.
Insider Trading
Providing information about executives trading company stocks based on confidential information.
Accounting Fraud
Reporting that your company is inflating revenue figures through fictitious sales.
Shareholder Fraud
Exposing a scheme where senior management is misleading shareholders about the company’s financial health.