On the heels of a recent enforcement case against a trio of investment firms for violating whistleblower protection rules, the U.S. Securities and Exchange Commission (SEC) is now settling charges with seven public companies for allegedly deterring tipsters.
The SEC settled charges against seven companies for including provisions in employment contracts, separation agreements and other documents that allegedly violated the regulator’s whistleblower rules by impeding potential tipsters from reporting suspected misconduct to the SEC.
“Ensuring that potential whistleblowers can communicate directly with the commission is a critical part of the SEC’s oversight mandate,” said Creola Kelly, chief of the SEC’s Office of the Whistleblower, in a release.
Last week the SEC took enforcement action against a trio of related investment firms, alleging that the confidentiality agreements they required clients to sign when settling complaints included provisions that breached the whistleblower protection rules.
In this case, the seven firms agreed to pay a combined US$3 million to resolve the SEC’s allegations. They’ve also revised the contracts and agreements to prevent future violations of the whistleblower protections, the regulator said.
“The SEC’s whistleblower program strengthens market integrity by providing protection and incentives for those who come forward and report potential violations of the securities laws,” said Jason Burt, director of the SEC’s Denver office.
“According to the SEC’s orders, among other things, these companies required employees to waive their right to possible whistleblower monetary awards. This severely impedes would-be whistleblowers from reporting potential securities law violations to the SEC,” he said.