SEC Enforcement Of SEC Whistleblower Protection Rules

The SEC’s Power To Enforce SEC Whistleblower Protection Rules

Two common ways of enforcing SEC whistleblower protection rules are (1) through SEC enforcement of anti-retaliation protections, and (2) through private enforcement of SEC whistleblower protections.

In the SEC’s enforcement of SEC whistleblower protections, the SEC itself brings a case against a person or company for violating the anti-retaliation sections of the SEC whistleblower rules.

In private enforcement of SEC whistleblower protection rules, the whistleblower brings his or her own civil lawsuit in federal court against the person or company who retaliated against him or her.  For more on the private enforcement of SEC whistleblower protections rules, click here.

The Commission Can Enforce The SEC Whistleblower Protection Rules On Its Own

The SEC whistleblower statute says that no employer can retaliate against an SEC whistleblower in the terms and conditions of employment for any lawful act that the whistleblower does in connection with:

• • Providing information about a violation of the federal securities laws to the SEC,

• • Initiating, assisting in, or testifying in any SEC investigation, or in any SEC judicial or administrative action of the SEC that is based on or related to that information,

• • Making disclosures required or protected by the Sarbanes-Oxley Act, or

• • Making disclosures required by any other law, rule, or regulation that is subject to the SEC’s jurisdiction.

The SEC whistleblower protection rules say that these anti-retaliation provisions, and any additional rules that the SEC passes related to them, “shall be enforceable” in an SEC action or proceeding.  (Rule 21F-2(b)(2).)

The Commission Can Enforce Its SEC Whistleblower Protection Rules Even If It Does Not Give Out A Whistleblower Award

The anti-retaliation protections apply to SEC whistleblowers even when they do not qualify for SEC whistleblower awards.

In addition to SEC whistleblowers, the SEC whistleblower protection rules protect the SEC whistleblower program itself.  When a company intimidates someone from reporting financial crimes or securities violations to the SEC, it does not only harm that person.  It also harms the SEC whistleblower program by intimidating or preventing people from using it.  This, in turn, damages the SEC’s ability to discover frauds and crimes, and to protect innocent investors and others.

The SEC whistleblower protection rules state that no person may impede an individual from communicating directly with the SEC staff about a possible securities law violation.

The SEC whistleblower protection rules also prohibit anyone from enforcing, or threatening to enforce, a confidentiality agreement with respect to an individual’s direct communications with the SEC about possible securities law violations.  (Rule 21F-17(a).)

The Commission Can Enforce The SEC Whistleblower Protection Rules In Any Type Of SEC Whistleblower Case

The SEC can and has brought its own anti-retaliation proceedings against companies in different types of SEC whistleblower cases.  This is because the focus of an SEC whistleblower protections case is the retaliation or intimidation itself.

If there is retaliation against or intimidation of one or more SEC whistleblowers, it does not matter if the violations or crimes allegedly committed were FCPA violations, accounting frauds, false statements, insider trading, or any other type of SEC whistleblower case.

Additional Information

For more information about the SEC’s enforcement of SEC whistleblower protection rules, click on the links below:

• SEC reaffirms commitment to whistleblower protections in its 2019 Annual Report to Congress.
• SEC sues company for allegedly impeding investors’ ability to communicate with the Commission.
• Company sanctioned for trying to uncover identity of SEC whistleblower.
• Company sanctioned for requiring employees to waive their rights to SEC whistleblower awards.
• SEC fines company $1.4 million for retaliating against internal whistleblower.
• Non-disparagement clause in severance agreements violated whistleblower protection rules.
• The first stand-alone SEC whistleblower retaliation case.
• SEC fines co. $6MM+ for putting liquidated damages clause in separation agreements.
• Company sanctioned for using severance agreements waiving SEC whistleblower awards, even though there was no evidence that the company ever tried to enforce the waiver clause.
• SEC’s first case against a company for requiring employees to waive their rights to whistleblower awards.
• SEC’s first case against a company for using language in a confidentiality agreement discouraging whistleblowers from communicating with the Commission.