The Securities and Exchange Commission (SEC), a government agency whose mission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation, has a rich history dating back to 1934. The SEC’s responsibility extends beyond the operation of the financial markets, as it is also tasked with enforcing the nation’s securities laws, including whistleblower protection rules.
Notably, on September 9, 2024, the SEC announced that it had settled charges against seven public companies that violated the whistleblower protection rule by using employment, separation, and other agreements to obstruct whistleblowers from reporting potential misconduct to the SEC. The companies, which included Acadia Healthcare Company, Inc., a.k.a. Brands Holding Corp., AppFolio, Inc., IDEX Corporation, LSB Industries, Smart for Life, Inc., and TransUnion, broke Rule 21F-17(a). This rule prohibits any action that prevents an individual from communicating directly with the SEC staff about a possible securities law violation.
The SEC’s orders highlighted that these companies required employees to waive their right to possible whistleblower monetary awards. Such actions would have greatly deterred potential whistleblowers from reporting suspected securities law violations to the SEC. To settle the SEC’s charges, the companies agreed to pay more than $3 million combined in civil penalties.
Watching over potential whistleblowers and enabling them to communicate directly with the Commission is a critical part of the SEC’s mandate. The companies charged all agreed not to violate this rule in the future and have enacted remediation measures, including changes to the relevant agreements.
This lays the groundwork for a vital reminder: whistleblower laws exist to protect your rights as employees. If you believe your employer has used the methods discussed to prevent you from reporting wrongdoing, do not stay silent. Remember that your rights are protected by whistleblower laws. Don’t hesitate to contact an experienced whistleblower attorney. By blowing the whistle, you contribute to the fight against corporate misconduct and uphold ethical business practices.
