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SEC Brings Two Enforcement Actions Against Employers for Taking Steps to Impede Whistleblower Activity
20 January 2017
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This week, the SEC charged two companies with violating the whistleblower provisions of Dodd-Frank by taking steps to impede protected whistleblower activity by departing employees. The companies agreed to pay $500,000 and $340,000, respectively, to settle the matters without admitting or denying wrongdoing.
Both cases involved the use of separation agreements that required departing employees to waive their ability to recover whistleblower awards. The SEC also alleged that one of the firms took other actions to impede its employees from communicating with SEC staff. While the separation agreements at issue did not prohibit departing employees from communicating with the SEC or other government agencies, the SEC asserted that the agreements undermined the purpose of the whistleblower program by requiring employees to waive their right to the program’s incentives in order to receive severance pay.
The SEC has now brought four enforcement actions that allege violations based on separation agreements that require departing employees to waive their ability to recover whistleblower awards. Accordingly, this week’s whistleblower enforcement actions are the latest reminder that employers should review all agreements to ensure that they do not contain provisions that can be read as prohibiting, discouraging or interfering with protected whistleblowing activities, including communication with the SEC and the collection of whistleblower awards. Employers should also avoid any activities that seek, or could be seen as seeking, to prevent or discourage whistleblowing complaints.
White Collar & Regulatory Defense
Whistleblower Investigations and Litigation
Mary Beth Hogan
Julie M. Riewe
Jonathan R. Tuttle
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