When the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) was enacted in July 2010, the act implemented numerous protections for investors and consumers. One of the indirect benefits was the implementation of whistleblower laws, which allows individuals to come forward and anonymously report securities violations.
The Dodd-Frank Act not only provided an avenue for whistleblowers to come forward, the act also implemented protections, anti-retaliation provisions, and other safeguards to ensure whistleblowers could come forward with no apprehension. Many of these protections are found in Section 21F, “Whistleblower Incentives and Protection,” of the Securities Exchange Act of 1934.
The purpose of Section 21F is to encourage whistleblowers to report possible securities violations by providing, among other things, financial incentives and various confidentiality agreements. Rule 21F-17 acts as a preemptive measure to prevent individuals and companies from hindering whistleblowers from coming forward. The provision specifically states:
- No person may take any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement with respect to such communications.
In practice, the SEC has used the rule on occasion to go after companies that limit what a whistleblower can say to regulatory authorities or publicly – usually attempting to limit negative or disparaging communications. This often takes the form of a provision in a severance or employment agreement, and the company will impose financial consequences on the employee for violations of the agreement.
Recently, BlackRock, Inc. entered into a settlement agreement with the SEC due to violations of 21F-17 in a provision it forced departing employees to agree to. BlackRock explicitly stated in its separation agreements that the employee would waive any right to recovery or incentives for reporting of misconduct under the Dodd-Frank Act.
An agreement like this completely undermines the purpose of the Dodd-Frank Act and its whistleblower laws. Further, it violates Rule 21F-17.
BlackRock settled with the SEC and voluntarily agreed to revise its separation agreements and paid a fine to the SEC, among other things.
Scott L. Silver, managing partner of the Silver Law Group, was an early proponent of the legislation and authored a primer on the SEC Whistleblower Program. Our legal team also includes David R. Chase, a former SEC prosecutor now working to protect whistleblowers.
Silver Law Group and The Law Firm of David R. Chase are committed to the protection of whistleblowers through the whistleblower claim process and can prosecute your whistleblower claims. If you have questions about your legal rights as a whistleblower, please contact Scott Silver of the Silver Law Group for a free consultation at firstname.lastname@example.org or toll free at (800) 975-4345.