The Securities and Exchange Commission has taken a strong stand against whistleblower retaliation. To protect securities whistleblowers, it has outlawed efforts to prevent or dissuade employees from reporting securities fraud to the commission. Although it took a few years to see progress in this area, 2015 and 2016 saw a number of enforcement actions brought by the SEC against corporations.
SEC Whistleblower Rule 21F-17
SEC regulations prohibit any person form impeding an individual from communicating with SEC staff about a possible securities law violation, including enforcing or threatening to enforce a confidentiality agreement.
Enforcement Actions to Date
The SEC brought its first enforcement action against a company for retaliation in 2014. The hedge fund advisory firm took a number of measures against its employee that eventually caused the whistleblower to resign.
The SEC charged KBR in 2015 with violating the whistleblower protection rule. This was the agency’s first action challenging a confidentiality agreement imposed on employees by a company. The KBR agreement required employees to report internally within the company before communicating with the SEC. KBR agreed to pay a civil penalty and take remedial measures.
There was a significant increase in enforcement actions in 2016.
The enforcement action against Merrill Lynch alleged a violation for initially prohibiting communications with the SEC without permission or in response to a lawsuit, and subsequently revising its agreement to allow voluntary disclosures but limiting the facts which could be communicated.
The HealthNet severance agreement which was the subject of an enforcement action prohibited an individual from filing a claim for an award with the SEC and required waiver of their right to a monetary recovery.
An enforcement action was brought against BlueLinx Holdings for its agreements which required the individual to maintain the confidentiality of information and waive any monetary recovery from the SEC whistleblower program.
Anheuser-Busch also was charged with chilling whistleblower communications as part of an FCPA settlement.
The SEC further brought its first enforcement action under Rule 21F-17 against a company for retaliation following an internal report by a securities whistleblower to the company in 2016.
The Office of Compliance Inspections and Examinations is reviewing paperwork at broker-dealers and registered investment advisors to ensure compliance with the rules and regulations protecting whistleblowers. The SEC issued a Risk Alert to these companies on this topic on October 24, 2016.
Individual Whistleblower Actions
SOX, Dodd-Frank and the SEC whistleblower program also allow an individual to file a retaliation lawsuit in federal court. If you have been fired or otherwise discriminated against for blowing the whistle on misconduct either internally within the corporation or externally to the Securities and Exchange Commission, call us at 1-800-590-4116 to speak to one of our SEC whistleblower attorneys.
To learn more about this option, visit our page on retaliation.
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