SEC crackdown on whistleblower violations a warning on employment contracts


What should your company be doing in response to increased enforcement emphasis by the Securities and Exchange Commission (SEC) regarding violations of its whistleblower protection rule?

Problematic and prohibited wording can exist in nondisclosure agreements, confidentiality agreements, employee onboarding agreements, voluntary or involuntary termination agreements, and in severance documents that an employee must sign to receive compensation or payments, among other documentation.

Consider the recent enforcement case against investment firm D.E. Shaw & Co., which agreed to pay a $10 million fine in September to settle charges it included prohibited clauses in certain types of employment agreements. The penalty was the largest ever assessed against a company for violating the whistleblower rule (Rule 21F-17), remarked SEC Enforcement Director Gurbir Grewal.

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