The SEC has continued its enforcement against employers — including privately held companies — that have provisions in their agreements or policies that could potentially discourage whistleblowing or communications with regulators.

Rule 21F-17 under the Securities Exchange Act of 1934 provides that “[n]o person may take an action to impede an individual from communicating directly with the [SEC] about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement ... with respect to such communications.” Three September 2023 cease-and-desist orders exemplify the prominence the SEC continues to place on this rule:

• A $225,000 civil penalty against a privately held company that had included a provision in separation agreements stating generally that its separating employees retained the right to file charges and complaints with governmental agencies and participate in investigations, but waived their right to recover an award from such agencies. Notably, the SEC imposed the penalty even though the company cooperated with the SEC, had revised the separation agreements to state that employees were not waiving such awards, had notified all employees who signed the agreements that they were not waiving such awards, and had never taken any steps to enforce the provision.
• A $375,000 civil monetary penalty against a real estate services and investment firm because it included an attestation in its separation and release agreements...

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