The U.S. Securities and Exchange Commission (SEC) is sanctioning another investment firm for allegedly violating whistleblower protections — in this case in connection with employment practices.
The SEC settled charges against a Florida-based investment adviser, GQG Partners LLC, for its use of non-disclosure agreements (NDAs) with prospective employees, and a former employee, that the regulator said would impede their ability to report potential securities law violations to the SEC.
Specifically, the SEC’s order alleged that the firm asked potential employees to sign NDAs that erected barriers to reporting suspected regulatory violations.
“While the [agreements] permitted them to respond to requests for information from the commission, it required notification to GQG of any such request and prohibited them from responding to requests arising from a … voluntary act of disclosure,” the order said.
Additionally, the order said the firm reached a settlement deal with a former employee that included provisions about their interaction with regulators that also allegedly violated whistleblower protections.
“Whether through agreements or otherwise, firms cannot impose barriers to persons providing evidence about possible securities law violations to the SEC, as GQG did,” said Corey Schuster, co-chief of the enforcement division’s asset management unit, in a release.
“Even agreements that contain carve-out language allowing people to voluntarily report to the SEC can be violative if restrictive language in a separate provision impedes voluntary reporting to the commission staff,” he added.
The firm agreed to settle the charges without admitting or denying the SEC’s findings. It agreed to be censured, to cease and desist from violating the whistleblower protection rule, and to pay a US$500,000 penalty.
Earlier this month, the SEC also took action against three investment firms for violations of whistleblower protections that were enshrined in settlements of client complaints, and it charged several public companies over employment contract provisions that, it alleged, sought to deter tipsters.