SEC May Seek Companies’ Agreements to Determine Whistleblower Treatment

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Publisher: Morgan Lewis
 

As the SEC continues to focus on it’s whistleblower initiative, companies should review their agreements and policies in light of the latest SEC actions.

The SEC’s Office of the Whistleblower has made clear that it will use its authority to ensure that companies do not use agreements and policies to impede whistleblowers from reporting information to regulators. In public comments last year, Sean McKessy, chief of the SEC’s Office of the Whistleblower, stated, “[W]e are actively looking for examples of confidentiality agreements, separat[ion] agreements, employee agreements… that in substance say ‘as a prerequisite to get this benefit you agree you’re not going to come to the commission or you’re not going to report anything to a regulator.’”[2] He also explained that if the SEC finds language that creates a chilling effect for potential whistleblowers to report to the SEC, “not only are we going to go to the companies, we are going to go after the lawyers who drafted it” and may revoke the lawyers’ ability to appear before the SEC.[3]

According to the Wall Street Journal article, “[t]he agency has asked the firms to turn over every nondisclosure agreement, confidentiality agreement, severance agreement and settlement agreement they entered into with employees since Dodd-Frank went into effect, as well as documents related to corporate training on confidentiality, according to the letter and the people familiar with the matter. The agency letter viewed by the Journal also asked for ‘all documents that refer or relate to whistleblowing’ and a list of terminated employees.”

To date, however, the SEC has not articulated specific guidance regarding what language or clauses it considers permissible or impermissible. Its position may become clear through enforcement actions.

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By : Securex /March 05, 2015 /Compliance, Securites Law /0 Comment