Washington, DC – The Senate has adopted
U.S. Senator Benjamin L. Cardin’s amendment (3840) to the Wall Street Reform bill that will extend whistleblower protections to employees of the 10 Nationally Recognized Statistical Ratings Organizations (NRSROs). NRSROs are the companies like Moody’s and Standard & Poor’s that issue credit ratings at the heart of the securities market.
“As we have sought answers that can help pull our economy – particularly the housing market – out of a tailspin, it has become obvious that the relationship between the rating agencies and major companies has been wholly unorthodox and fiscally unhealthy. Competitive pressures and inherent conflicts of interest have affected the objectivity of the NRSRO ratings, helping to inflate the housing bubble and eventually contributing to the collapse of the subprime market and so many sectors of our economy.
“The proof of this wrongdoing can be found in the tardy and massive, simultaneous corrections that helped cause the housing bubble to burst. A full 91 percent of the AAA-rated securities backed by subprime mortgages issued in 2007 have been downgraded to junk status, along with 93 percent of those issued in 2006. Someone at these agencies had to be aware of the problems with these ratings early enough to have made a difference in the severity of the failures.
But if they had stepped forward, they had no protections under the law.
“S. 3217 contains several provisions to improve SEC and Congressional oversight and the functioning of NRSROs.
Extending whistleblower protections helps to strengthen the underlying bill by providing a safety net to those who may be witness to malfeasance but fear putting their livelihood or family obligations at risk.”
In the wake of the Enron, WorldCom, and Tyco corporate scandals, Congress passed the Sarbanes-Oxley Act in July 2002.
One of the provisions in the Act extended whistleblower protections to employees of any company that is registered under the SEC Act of 1934 (15 U.S.C. 780) or that is required to file reports under section 15(d) of the same act.
Codified as 18 U.S.C. § 1514A, the whistleblower provisions of the Sarbanes-Oxley Act protect employees of the aforementioned publicly traded companies from retaliation by giving victims of such treatment a cause of action which can be brought in federal court.
Section 1514(a) delineates what companies are covered by the Act and what actions are prohibited.
The Cardin-Grassley amendment expands the provision to include employees of NRSROs.