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SEC Brings Further Actions for Violation of Whistleblower Protection Rule

The SEC has brought charges against a private subsidiary of a publicly traded company for using an employee release agreement that violated the SEC’s whistleblower protection rule. The company required employees to sign a release agreement attesting that they had not filed a complaint against the company with any federal agency, in order to receive separation pay.

The SEC has also brought and settled charges against a registered investment adviser for requiring employees to sign agreements prohibiting them from disclosing confidential information to any outside parties unless authorized or required by law or court order. The RIA also required departing employees to sign releases affirming that they had not filed any complaints with any governmental agency in order to receive deferred compensation and other benefits. The RIA settled the charges for $10 million.

Companies (including unregulated private companies) should not prevent employees from sharing information or filing complaints with regulators, or have employees attest to not having done so. Crucially, companies should also take care when defining "confidential information" in employment agreements, to ensure the SEC does not view confidentiality clauses as effectively restricting whistleblower rights. 


capital markets, capital markets and securities, corporate, l&e, real estate, bfs