In a significant move aimed at curbing the suppression of whistleblowers, the U.S. Securities and Exchange Commission (SEC) has settled charges with seven public companies for using agreements that violated whistleblower protection rules. These agreements, which included employment, separation, and other forms, hindered employees from reporting potential securities violations to the SEC.
The companies involved — Acadia Healthcare Company, Brands Holding Corp., AppFolio Inc., IDEX Corporation, LSB Industries, Smart for Life Inc., and TransUnion — have collectively agreed to pay over $3 million in civil penalties as part of the settlement.
The SEC highlighted that these firms violated Rule 21F-17(a), which specifically prohibits companies from taking actions that deter individuals from reporting potential misconduct directly to the SEC. By requiring employees to waive their right to whistleblower monetary awards, these companies severely restricted their ability to report securities law violations.
Jason J. Burt, Director of the SEC’s Denver Regional Office, said, “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.
In response, the firms have agreed to cease these practices and have taken corrective measures to address the violations, including modifying the affected agreements.
Creola Kelly, Chief of the SEC’s Office of the Whistleblower, emphasized the critical importance of whistleblower protection in ensuring that the SEC can carry out its oversight mandate effectively. “We will continue to take action against companies that try to impede this process,” Kelly stated.
The SEC’s investigation remains ongoing, with the potential for additional charges and penalties if further violations are uncovered.
