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Are Fund Adviser Employees Protected as Whistleblowers?

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  • Baker, John
    The mutual fund shareholder advocacy organization Fund Democracy, the consumer groups Consumer Federation of America and Consumer Action, and the North
    Message 1 of 1 , Apr 22, 2008
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      The mutual fund shareholder advocacy organization Fund Democracy, the consumer groups Consumer Federation of America and Consumer Action, and the North American Securities Administrators Association have jointly filed a request for a Securities and Exchange Commission interpretive position that the whistleblower provision in the Sarbanes-Oxley Act of 2002 generally applies to employees of a mutual fund's investment adviser. Section 806 of the Sarbanes-Oxley Act generally prohibits discrimination against employees of public companies in retaliation for assisting in the investigation of a violation of the federal securities laws. Mutual funds are public companies and are covered by this provision. Some investment advisers have argued, however, that the statute does not apply to employees of investment advisers to mutual funds, when the adviser is not a public company. The requesting parties argue that excluding employees of mutual fund investment advisers from the whistleblower provision contradicts the text and the intent of Section 806.

      The issue is a complicated one, and Fund Democracy (clearly the driving force behind the request) makes the best available case for its position. It does not, however, address a more fundamental issue: Whether Section 806 is a statute on which the SEC has special expertise to opine. One might think that the appropriate regulator, if any, would be the Secretary of Labor, who has an explicit role in the Section 806 statutory scheme. The SEC does not seem to have made any reference as yet to the request on its own web site. The March 28 joint request is available online at Fund Democracy's web site at

      http://www.funddemocracy.com/whistleblower%20letter%20final.pdf


      John M. Baker <JMB@...>
      Stradley Ronon Stevens & Young, LLP http://www.stradley.com
      1220 19th Street NW, Suite 600
      Washington DC 20036
      202.419.8413
      202.822.0140 fax
      FundLaw Listowner http://groups.yahoo.com/group/fundlaw
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