The Denver office of the Securities and Exchange Commission has rolled up a bunch more whistleblower rule violations. This follows up with last week’s settlement with Nationwide Planning for impeding clients from reporting violations to the SEC.
In response to a Congressional mandate in Dodd-Frank, the Securities and Exchange Commission adopted Rule 21F-17 in August 2011, which provides:
(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.
In prior enforcement actions, the SEC has aggressively pursued actions against firms who have tried to limit the ability of its customers or employees to report violations. Against CBRE, the SEC did not like its form of separation agreement that had a representation that the departing employee had not already filed a compliant. The SEC did not like that Monolith Resources tried to limit whistleblowers by allowing them to report, but not retain any financial rewards for reporting. Nationwide Planning tried to allow clients to talk with the SEC, but only if the SEC started the talk.
In these cases, Smart for Life, LSB, IDEX, Acadia, and Brands Holding took the path of allowing employees to report a violation but preventing employees from getting any financial award from a whistleblower complaint path. The SEC doesn’t like that.
Transunion and AppFolio tried to prevent employees from getting any financial award from a whistleblower complaint. And also addied that the employees give the company notice before disclosing anything.
As with the off-channel communications cases, there is no charge of fraud. The cases merely cite a violation of the rule.
Sources:
- SEC Charges Seven Public Companies with Violations of Whistleblower Protection Rule
- Order – a.k.a. Brands Holding Corp.
- Order – Acadia Healthcare Company, Inc
- Order – AppFolio, Inc.
- Order – IDEX Corporation
- Order – LSB Industries, Inc.
- Order – Smart for Life, Inc.
- Order – TransUnion
- Whistleblower case against Nationwide