To review recent enforcement actions in which the Securities and Exchange Commission (“SEC”) enforced Rule 21F-17(a) under the Securities Exchange Act, which prohibits actions to impede whistleblower communications with the SEC, and to identify changes that entities subject to SEC regulation (including public companies, broker-dealers and investment managers) may wish to consider in their employee separation agreements and other documents that may include confidentiality provisions.
Examines settled cases since 2015, in which the SEC found that contractual provisions in employee separation agreements and other documents impeded employees from communicating with the SEC staff about possible violations of the securities laws, to identify the types of language that the SEC found to be problematic and the types of provisions that the SEC believes are desirable, if not legally mandated, to protect employee whistleblower rights and avoid impeding communications under Rule 21F-17(a).
Beginning in 2015, the SEC has actively enforced Rule 21F-17(a), focusing on provisions in separation agreements and other employee-related documents that potentially prevent employees from reporting legal violations to the SEC. The SEC’s efforts have resulted in settled orders involving alleged violations of the rule. The cases generally allege that provisions in employee separation agreements or other documents violated the rule because they prohibited or chilled employee communications with the SEC about possible legal violations.
Entities subject to SEC regulation (including public companies, broker-dealers and investment managers) should review their confidentiality agreements with employees and consider whether changes are warranted to address the SEC’s concerns as identified in the Rule 21F-17(a) cases.
Practical guidance regarding important whistleblower developments from experienced securities lawyer.
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