SEC Matters

• Published date: 01 September 2015
• DOI: http://doi.org/10.1002/jcaf.22090
• Date: 01 September 2015

115

© 2015 Wiley Periodicals, Inc.

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

DOI 10.1002/jcaf.22090

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SEC Matters

Donald A. Walker Jr.

WHISTLEBLOWER CASES

AND CONFIDENTIALITY

AGREEMENTS

When the SEC established

the Office of the Whistleblower

and attendant regulations, the

staff did not anticipate the

volume and quality of whistle-

blower tips it has received to

date. It apparently also did

not anticipate the strength and

breadth of debate over con-

fidentiality agreements that

whistleblower cases have raised.

Chair White, in her address to

the Northwestern University

School of Law’s Garrett Insti-

tute on April 30, 2015, entitled

“The SEC as the Whistleblow-

er’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, suspend,

threaten, harass, directly

or indirectly, or in any

other manner discrimi-

nate against, a whistle-

blower in the terms and

conditions of employ-

ment 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 inves-

tigations to sign con-

fidentiality statements

with language warning

that employees could

face discipline, including

termination, if they dis-

cussed the subject mat-

ter 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 communi-

cations. …

We also know that

retaliation against

whistleblowers

occurs—sometimes

starkly, sometimes

more subtly—and that

is very troubling. For

the SEC’s part, we are

working hard to foster

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

report violations of law

to the SEC. …

On April 1, 2015, the SEC

announced its first enforcement

action against a company for