On September 9, the SEC settled charges against seven public companies for violations of the whistleblower protection rule. According to the SEC’s orders, among other things, these companies violated Rule 21F-17(a) by requiring employees to waive their right to possible whistleblower monetary awards in employment, separation, and other agreements. The SEC argues that these provisions indirectly impede potential whistleblowers from reporting potential securities law violations.   

On September 26, the SEC settled charges against advisory firm GQG partners ("GQG") for violating the whistleblower protection rule as well. According to the SEC’s order, the firm entered into non-disclosure agreements that prohibited candidates from disclosing confidential information about GQG, including to government agencies. The agreements permitted the candidates to respond to information requests from the SEC, but it required notification to GQG of any such request and prohibited responding to requests arising from a candidate’s voluntary disclosure. GQG also entered into a settlement agreement with a former employee making various problematic representations, including that the employee would withdraw any statements already made to the SEC that might support an investigation. 

Companies should review their employment and separation agreements along with related policies for provisions requiring employees to waive their right to whistleblower awards or requiring notice of whistleblower communications to agencies. Recent SEC and DOJ whistleblower programs and this enforcement sweep reinforce the need to consider and adopt best practices for company whistleblower programs.  

This article is part of a Fenwick "Securities Law Update" authored by David A. Bell, Ran Ben-Tzur, Amanda Rose, and Merritt Steele.