SEC Moves To Protect The Whistleblower Program From Employee Confidentiality Agreements

July 1, 2022

The SEC whistleblower program is a decade-old program that is an important part of the SEC’s enforcement regime. Since its inception, the SEC has issued more than 200 individual awards totaling more than $1.1 billion. By providing a bounty to individuals who report securities law violations to the SEC, the SEC is better able to detect and take action against companies committing securities fraud. 

A crucial part of the decade-old program is Section 21F and Rule 21F-17(a), which is a rule adopted by the SEC in 2011 to ensure that any confidentiality agreements contain a carveout for whistleblowers. Specifically, the rule “prohibits any person from taking any action to impede an individual from communicating directly with the commission, including by ‘enforcing, or threatening to enforce, a confidentiality agreement.’” 

On June 22, 2022, The Brink’s Co. reached a settlement with the SEC over allegations that the company used overly-restrictive confidentiality agreements with employees that did not provide an exception for SEC whistleblower activity. Without this exception, the SEC alleged that the agreement violated Rule 21F-17(a) because it effectively “impede[d] an individual from communicating directly with the commission” about Brink’s financial or business information—information that is necessarily relevant to a securities fraud investigation. As part of the agreement, Brink’s agreed to pay a $400,000 civil penalty and include a provision in all confidentiality orders going forward that makes clear that employees “can provide confidential information to Government Agencies without risk of being held liable by Brinks for liquidated damages or other financial penalties.”

Though Brinks did not admit any liability, the settlement is important because it discourages such restrictive agreements in the future. Securities fraud harms ordinary investors and undermines faith in the US financial system. The SEC whistleblower program plays an important part in protecting the integrity of the market. The SEC’s enforcement of Rule 21F sends a clear message that whistle blowers are protected.  

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About Daniel Weiss

Daniel B. Weiss is an associate in the firm's New York office. His practice is focused on securities litigation.

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