SEC Whistleblower Lawyer Blog
The SEC recently reached a $3 million collective settlement with seven public companies charged with violating whistleblower protection Rule 21F-17(a). This rule prohibits any actions by companies that impede an individual from communicating directly with the SEC staff about a possible securities law violation they observe.
The companies cited were:
- Acadia Healthcare Company Inc., $1.3 million
- k.a. Brands Holding Corp., $399,000
- AppFolio, Inc., $692,000
- IDEX Corp., $75,000
- LSB Industries, Inc., $156,000
- Smart for Life, Inc., $19,500
- TransUnion, $312,000
The companies used employment, separation, and other agreements to prevent whistleblowers from contacting the SEC to report misconduct. These actions violate the legal protections provided by the Dodd-Frank Act.
Most of the affected individuals were consultants, contractors, departing and former employees. Despite this, there is no evidence that any of the companies attempted to enforce these agreements, or that anyone declined to speak to the SEC about possible securities law violations or other misconduct.
The SEC stated that the provisions “created impediments to participation in the commission’s whistleblower program by having the employees forego the critically important financial incentives that are intended to encourage persons to communicate directly with the commission staff about possible securities law violations. Such restrictions on accepting financial awards for providing information regarding possible securities law violations to the commission undermine the purpose of Section 21F and Rule 21F-17(a), which is to ‘encourag[e] individuals to report to the commission.’”
The SEC also stated in its announcement that although the companies agreed to the settlements, investigations are still ongoing. The companies also agreed to no longer restrict potential whistleblowers going forward and make changes to their various agreements to be in compliance with Dodd-Frank.
In a statement, Jason Burt, director of the SEC’s Denver regional office, stated: “The SEC’s whistleblower program strengthens market integrity by providing protection and incentives for those who come forward and report potential violations of the securities laws … these companies required employees to waive their right to possible whistleblower monetary awards. This severely impedes would-be whistleblowers from reporting potential securities law violations to the SEC.”
These settlements are just the latest in a series of actions against companies involving whistleblowers’ rights.
What Rights Do Whistleblowers Have?
Under Dodd-Frank, anyone who witnesses or has information about potential securities law violations has the right to contact the SEC to report the activity. They can report anonymously when represented by legal counsel. Employers are prohibited from firing, demoting, or otherwise retaliating against someone who contacts the SEC to report wrongdoing.
The SEC has more information available on its website.
Retaining Experienced SEC Whistleblower Attorneys
SEC whistleblowers help everyone by notifying the SEC of conduct that harms the investing public, while also earning financial compensation for themselves. Hiring experienced SEC counsel may greatly increase the probability that the SEC will initiate an investigation based on your information. If you wish to remain anonymous, you must be represented by an attorney, who will submit everything on your behalf.
Silver Law Group and the Law Firm of David R. Chase have formed a strategic alliance and jointly have experienced SEC whistleblower lawyers, including a former SEC Enforcement attorney on the team, so you will always have guidance throughout the process. Our SEC whistleblower attorneys can help you if you have information regarding securities or investment fraud, violations of federal securities laws, false filings, market manipulation, or other misconduct. You must provide timely, credible, and original information or analysis to be eligible.
Contact us through our online form or at (800) 975-4345 for a consultation. Our attorneys work on a contingency fee basis. This means that it costs you nothing to hire us, and we collect our fees only if you receive an SEC bounty. Because we get paid when you do, we have the incentive to help you collect the maximum award available.