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Apr 1, 2015 by |

What Lawson v. FMR Tells Us About SEC Jurisdiction Over Private Entities

ATTORNEY NEWSLETTER

The Supreme Court’s March 2014 decision in Lawson v. FMR LLC serves as a reminder that the SEC does exercise enforcement jurisdiction over private entities, say San Francisco securities fraud lawyers.

In Lawson, the plaintiffs were former employees of private entities that provided investment, advisory, and other services to the Fidelity family of mutual funds. The funds are required to file reports to the SEC, but do not have any employees of their own. Jackie Lawson and her fellow plaintiff Jonathan Zang filed suit in federal court. Lawson claimed that she was denied a promotion and constructively discharged for making protected complaints about internal cost allocations used for Fidelity fund profitability calculations. Zang claimed he had been discharged for raising concerns about alleged inaccuracies in a draft supplemental registration statement filed by a Fidelity fund with the SEC.

FMR moved to dismiss the complaints based on the fact that the plaintiffs were employed by a private entity, rather than by a public company. The case eventually reached the Supreme Court, which ruled that contractors are, in fact, protected against retaliation pertaining to securities fraud. The majority opinion also noted that outside professionals such as lawyers, accountants, and auditors bear significant responsibility for reporting fraud at the public companies they serve.

Although the Lawson decision does have implications for private entities, it does not expand the anti-reliatory protections to the more than 6 million private companies in the U.S, according to San Francisco securities fraud lawyers. In order to receive anti-retaliatory protection, the whistleblower still must blow the whistle on public company misconduct believed to constitute securities fraud.

Private entities should still adopt anti-retaliatory policies, train supervisors on how to deal with whistleblowers, and establish procedures and protocols to govern whistleblower complaints, advise San Francisco securities fraud lawyers.

Evans Law Firm, Inc. has offices in San Francisco, Los Angeles, and Sonoma, and handles all types of securities fraud and whistleblower cases, including SEC and IRS whistleblower cases. If you have a securities fraud or whistleblower case, please contact the Evans Law Firm, Inc. at 415-441-8669 or via email at info@evanslaw.com.

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