The SEC announced its second enforcement action in a week against a company using severance or confidentiality agreements requiring employees to waive whistleblower bounties or their right to bring a qui tam action.
In this week's settled action, the SEC fined publicly-traded Health Net $340,000 for having used severance agreements (over 4 years) that expressly allowed government reporting and cooperation in investigations but required waiver of monetary awards and qui tam actions. The offending agreements included waivers of:
"the right to file an application for award for ...
The SEC has fined an Atlanta company $265,000 for using various severance agreements restricting whistleblower activities.
The Dodd-Frank Act added '34 Act § 21F encouraging whistleblower programs. The SEC adopted Rule 21F-17 providing:
(a) No person may take any action to impede an individual from communicating
directly with the Commission staff about a possible securities law violation,
including enforcing, or threatening to enforce, a confidentiality agreement . . . with respect to such communications.
The Company's severance agreements contained confidentiality and ...
There's a developing circuit split over whistleblower standing for retaliation claims. A decision this week extended that split to U.S. district courts within Tennessee, too. In Verble v. Morgan Stanley Smith Barney, LLC, No. 3:15-CV-74-TAV-CCS (Dec. 8, 2015 USDC EDTN), the Eastern District of Tennessee joined with the Fifth Circuit view that Dodd-Frank whistleblowers must report to the SEC to have standing. An earlier decision from the Middle District of Tennessee had sided with the Second Circuit's view, deferring to the broader language of the SEC regulations that would ...
Since 2004, FINRA has required its member firms to include in settlement-agreement confidentiality clauses an exception expressly allowing a customer to respond to regulatory inquiries. See Notice to Members 04-44. FINRA recently updated that requirement to include express permission to be a whistleblower. FINRA's suggested language provides: Any non-disclosure provision in this agreement does not prohibit or restrict you (or your attorney) from initiating communications directly with, or responding to any inquiry from, or providing testimony before, the SEC, FINRA, any ...