Last week the US Supreme Court issued its decision in Digital Realty Trust v. Somers (Somers). It was a closely watched case in the compliance community. Yesterday, I reviewed the Court’s decision. In this podcast, Roy Snell and I consider the impact of the Court’s decision on a variety of actors; including the SEC itself, Chief Compliance Officers (CCOs) and compliance practitioners, compliance programs and corporate America.

While we both agreed the Supreme Court came to the correct legal decision, there are several areas which this decision may well lead to negative impacts. The first is the message that it sends to potential whistleblowers; if you do not report to the Securities and Exchange Commission (SEC) you will not receive any legal protections against discrimination or retaliation.

Second, is the impact on every Chief Compliance Officer (CCO) or compliance practitioner. This decision will negatively impact attempts to create a best practices compliance program. A key part of any best practices compliance program is an internal reporting mechanism (Hallmark 8 of an Effective Compliance Program).

Third is that companies will be cut off from its best sources of information, that from its own employees, companies now will have less ability to detect and then remediate any problems before they become legal violations or keep legal violations from expanding.

Finally is the impact the decision will have on the SEC itself. Now there is no incentive to report internally because you are not eligible for any financial incentive nor will you receive any protections from discrimination or retaliation. It is possible the SEC will be literally inundated with potential securities-laws violations.