Opinion

Congress never intended to subject mom-and-pop shops to Sarbanes-Oxley

Karen Harned Executive Director, NFIB Small Business Legal Center
Font Size:

We all remember the Enron debacle. Investors lost millions when it came to light that the corporation had inflated information — or outright lied — about its assets and profits. Understandably, the public was outraged. Accordingly, Congress took action to prevent “publicly traded companies” from engaging in this sort of fraud in the future.

To that end, Congress passed the Sarbanes-Oxley Act, which provided special whistleblower protections for employees of publically traded corporations. The whole idea was to protect those of us who choose to invest in publically traded corporations by encouraging corporate employees to report indiscretions early on. Of course most small business owners have never heard of Sarbanes-Oxley. And why should they?

Small business owners were never implicated in the Enron scandal, except to the extent that they had personally invested in Enron stocks before the company’s collapse. What is more, Sarbanes-Oxley—which was meant to prevent the next Enron implosion—was targeted at publically traded corporations, not small business. To be sure, the debate on the floor of Congress made clear that Sarbanes-Oxley was never intended to impact small business whatsoever.

For one, there was no reason to bring small business into the Sarbanes-Oxley regulatory regime because Congress was only concerned about preventing public corporations from misleading potential investors. Small businesses were simply thought to be exempt. But, today the Supreme Court is hearing oral arguments in a case in which aggressive plaintiff attorneys — and the Obama Administration — are insisting that the act’s whistleblower protections should apply to the employees of independent companies.

To defend the interests of mom-and-pop companies throughout the country, the National Federation of Independent Business (NFIB) Small Business Legal Center filed an amicus brief to make clear that extending Sarbanes-Oxley would result in tremendous new costs for small business. For one, most small businesses lack the resources to hire a team of in-house attorneys to help navigate through the complex Sarbanes-Oxley regime. Still more concerning is that, by extending Sarbanes-Oxley to small businesses we would be opening the flood gates for new lawsuits against companies that are already struggling in this tepid economy.

In a country already dealing with a frivolous lawsuit problem, the last thing we need is to open the door for ex-employees to begin suing under a law that Congress never intended should apply to small business. The truth is that if the Court extends Sarbanes-Oxley to non-publicly traded companies, small business owners will be walking through a legal minefield whenever dealing with sensitive information. This is because Sarbanes-Oxley authorizes “whistleblowers” to sue their employer after reporting a perceived impropriety whenever it appears that the company has taken an adverse action against the employee. Even unsubstantiated allegations will result in costly legal battles for small business owners.

But what is more, the whistleblower protections are only triggered for employees who report indiscretions of publically-traded corporations. This means that small businesses would be placed in the difficult situation of choosing between violating the trust of a corporate client and reporting unsubstantiated suspicions of the client’s indiscretions.

But there is no reason to place small businesses in this awkward position. As we have said from the beginning, Sarbanes-Oxley was never intended for small business. We hope that the Supreme Court will make this point clear when it issues its opinion in Lawson v. FMR.

PREMIUM ARTICLE: Subscribe To Keep Reading

Sign up

By subscribing you agree to our Terms of Use

You're signed up!

Sign up

By subscribing you agree to our Terms of Use

You're signed up!
Sign up

By subscribing you agree to our Terms of Use

You're signed up!

Sign up

By subscribing you agree to our Terms of Use

You're signed up!
Sign up

By subscribing you agree to our Terms of Use

You're signed up!

Sign Up

By subscribing you agree to our Terms of Use

You're signed up!
Sign up

By subscribing you agree to our Terms of Use

You're signed up!
Sign up

By subscribing you agree to our Terms of Use

You're signed up!
BENEFITS READERS PASS PATRIOTS FOUNDERS
Daily and Breaking Newsletters
Daily Caller Shows
Ad Free Experience
Exclusive Articles
Custom Newsletters
Editor Daily Rundown
Behind The Scenes Coverage
Award Winning Documentaries
Patriot War Room
Patriot Live Chat
Exclusive Events
Gold Membership Card
Tucker Mug

What does Founders Club include?

Tucker Mug and Membership Card
Founders

Readers,

Instead of sucking up to the political and corporate powers that dominate America, The Daily Caller is fighting for you — our readers. We humbly ask you to consider joining us in this fight.

Now that millions of readers are rejecting the increasingly biased and even corrupt corporate media and joining us daily, there are powerful forces lined up to stop us: the old guard of the news media hopes to marginalize us; the big corporate ad agencies want to deprive us of revenue and put us out of business; senators threaten to have our reporters arrested for asking simple questions; the big tech platforms want to limit our ability to communicate with you; and the political party establishments feel threatened by our independence.

We don't complain -- we can't stand complainers -- but we do call it how we see it. We have a fight on our hands, and it's intense. We need your help to smash through the big tech, big media and big government blockade.

We're the insurgent outsiders for a reason: our deep-dive investigations hold the powerful to account. Our original videos undermine their narratives on a daily basis. Even our insistence on having fun infuriates them -- because we won’t bend the knee to political correctness.

One reason we stand apart is because we are not afraid to say we love America. We love her with every fiber of our being, and we think she's worth saving from today’s craziness.

Help us save her.

A second reason we stand out is the sheer number of honest responsible reporters we have helped train. We have trained so many solid reporters that they now hold prominent positions at publications across the political spectrum. Hear a rare reasonable voice at a place like CNN? There’s a good chance they were trained at Daily Caller. Same goes for the numerous Daily Caller alumni dominating the news coverage at outlets such as Fox News, Newsmax, Daily Wire and many others.

Simply put, America needs solid reporters fighting to tell the truth or we will never have honest elections or a fair system. We are working tirelessly to make that happen and we are making a difference.

Since 2010, The Daily Caller has grown immensely. We're in the halls of Congress. We're in the Oval Office. And we're in up to 20 million homes every single month. That's 20 million Americans like you who are impossible to ignore.

We can overcome the forces lined up against all of us. This is an important mission but we can’t do it unless you — the everyday Americans forgotten by the establishment — have our back.

Please consider becoming a Daily Caller Patriot today, and help us keep doing work that holds politicians, corporations and other leaders accountable. Help us thumb our noses at political correctness. Help us train a new generation of news reporters who will actually tell the truth. And help us remind Americans everywhere that there are millions of us who remain clear-eyed about our country's greatness.

In return for membership, Daily Caller Patriots will be able to read The Daily Caller without any of the ads that we have long used to support our mission. We know the ads drive you crazy. They drive us crazy too. But we need revenue to keep the fight going. If you join us, we will cut out the ads for you and put every Lincoln-headed cent we earn into amplifying our voice, training even more solid reporters, and giving you the ad-free experience and lightning fast website you deserve.

Patriots will also be eligible for Patriots Only content, newsletters, chats and live events with our reporters and editors. It's simple: welcome us into your lives, and we'll welcome you into ours.

We can save America together.

Become a Daily Caller Patriot today.

Signature

Neil Patel