Settled Actions Reiterate SEC’s Broad Interpretation of Rule 21F-17(a) Whistleblower Impediments
On September 9, 2024, the Securities and Exchange Commission (the “SEC”) announced settled enforcement actions against seven public companies for Rule 21F-17(a) violations. Rule 21F-17(a) of the Securities Exchange Act of 1934 prohibits any person from taking any action to impede individuals from contacting the SEC to report a possible securities law violation, including enforcing […]
Andrew Ceresney, Arian June, and Julie Riewe are Partners at Debevoise & Plimpton LLP. This post is based on their Debevoise memorandum.
On September 9, 2024, the Securities and Exchange Commission (the “SEC”) announced settled enforcement actions against seven public companies for Rule 21F-17(a) violations. Rule 21F-17(a) of the Securities Exchange Act of 1934 prohibits any person from taking any action to impede individuals from contacting the SEC to report a possible securities law violation, including enforcing or threatening to enforce a confidentiality agreement. For the past several years, the SEC has been vocal about its position that language in employee agreements, company policies and other material, could be interpreted as having a chilling effect on potential whistleblowers and are therefore violative of Rule 21F-17(a). The latest companies to be charged by the SEC for language contained in their agreements include Acadia Healthcare Company, Inc., a.k.a. Brands Holding Corp.; AppFolio, Inc.; IDEX Corporation; LSB Industries; Smart for Life, Inc.; and TransUnion. Without admitting or denying the charges, these companies each agreed to civil penalties ranging from $19,500 to $1.3 million for a combined total of over $3 million in penalties. The penalty amounts appear to be largely driven by the number of violative agreements identified by the SEC. The recent settlements are the latest cautionary notice for companies to review a broad range of agreements, policies and other communications with individuals for any potential whistleblower impediments.
