On Friday, September 29, 2023, the Securities and Exchange Commission (the “SEC”) issued an order that censured D. E. Shaw & Co., L.P., a registered investment advisor in New York, and assessed a civil penalty of $10,000,000 following the SEC’s investigation of its practices with respect to its employment agreements and separation agreements. The remarkable order came close on the heels of two other SEC orders that impact language in separation agreements, confidentiality agreements, employment agreements with confidentiality provisions, Codes of Conduct and other similar documents. Notably, the SEC did not find that anyone was actually impeded from engaging in whistleblower activity; it was enough that the companies used agreements that the SEC found could impede such activity.

In the Matter of D. E. Shaw & Co, L.P., the SEC found that D. E. Shaw’s employment agreements and separation agreements raised impediments to whistleblowing for several reasons. First, its form employment agreements that were used from 2011-2019 included broad nondisclosure provisions and did not include adequate whistleblower protection language. Second, the firm’s separation agreements, under which employees released claims in exchange for post-termination payments, conditioned the post-termination payments on a representation that the employee had not filed any complaint or commenced any proceeding with any governmental agency. Third, D. E. Shaw issued exit letters to certain employees...

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