SEC Matters

• DOI: http://doi.org/10.1002/jcaf.22199
• Published date: 01 October 2016
• Author: Donald A. Walker
• Date: 01 October 2016

115

© 2016 Wiley Periodicals, Inc.

Published online in Wiley Online Library (wileyonlinelibrary.com).

DOI 10.1002/jcaf.22199

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SEC

SEC Matters

Donald A. Walker Jr.

WHISTLEBLOWER CASES

AND CONFIDENTIALITY

AGREEMENTS

When the Securities and

Exchange Commission (SEC)

established the Office of the

Whistleblower and attendant

regulations, the staff did not

anticipate the volume and

quality of whistleblower tips

it has received to date. It appar-

ently also did not anticipate

the strength and breadth of

debate over confidentiality

agreements that whistleblower

cases have raised. Chair White,

in her address to the North-

western University School of

Law Garrett Institute on April

30, 2015, entitled “The SEC as

the Whistle blower’s Advocate,”

stated:

Dodd-Frank expanded

the protections and

remedies for retaliation

against whistleblowers

that were first laid out

in Sarbanes-Oxley. The

scope of the prohibi-

tion against retaliation

is appropriately broad:

employers cannot “dis-

charge, demote, sus-

pend, threaten, harass,

directly or indirectly,

or in any other manner

discriminate against,

a whistleblower in the

terms and conditions

of employment because

ofany lawful act done

by the whistleblower”

toprovide information

or assistance to the

Commission. …

The Enforcement

Division has been

focused on companies

that use agreements or

other mechanisms to

improperly stifle whis-

tleblowers from coming

forward. On April 1,

2015, we announced

our first enforcement

action against a com-

pany for using confi-

dentiality agreements

that could potentially

stifle the whistleblowing

process. We charged the

company with violating

Rule 21F-17 because

it required witnesses

in certain internal

investigations to sign

confidentiality state-

ments with language

warning that employees

could face discipline,

including termination,

if they discussed the

subject matter of the

interviewwith outside

partieswithout prior

approval. …

Rule 21F-17 clearly

states that no action

may be taken to

impede an individual

from communicating

directly with the Com-

mission staff about

possible securitieslaw

violations, including by

enforcing or threaten-

ing to enforce confi-

dentiality agreements

that could be read to

limit such communica-

tions. …

We also know that

retaliation against

whistle blowers occurs,

sometimes starkly, some-

times more subtly—and

that is very troubling.

For the SEC’s part, we

are working hard to fos-

ter a safe environment

for whistleblowers by

investigating and charg-

ing those who retaliate

as well as those who,

whether inadvertently

ornot, take actions or

use agreements that

could chill the willing-

ness of employees to