White Collar Litigation Alert: SEC Files Action Against Employer Alleged to Have Impeded Tipsters Through Employee Confidentiality Agreements

Summary: As the SEC increasingly relies on its Whistleblower Program to encourage people to come forward with information leading to securities enforcement actions, it is taking meaningful steps to protect that valuable resource. Just a few months after the SEC brought its first whistleblower retaliation case against an employer in June 2014, the chief of the SEC’s Office of the Whistleblower revealed that he was actively looking to bring a case against an employer not merely for after-the-fact retaliation but for entering into confidentiality agreements that prospectively impede would-be whistleblowers from contacting the SEC. On April 1, 2015, the SEC brought such a case—the first of its kind—against a company that required employees that had participated in internal investigative interviews to sign restrictive confidentiality agreements. Without admitting or denying the allegations, the company settled with the SEC for $130,000 and agreed to take remedial action regarding its restrictive agreements.