Section 21F, titled "Whistleblower Incentives and Protection," is a set of provisions within the Securities Exchange Act of 1934 that govern, among other things, the rights and obligations of SEC whistleblowers and the procedures for determining SEC whistleblower awards. Rule 21F-17 (Rule) was promulgated in July 2010 to ensure that companies could not interfere with an individual's efforts to communicate concerns about possible securities violations to the SEC.
Specifically, Rule 21F-17 prohibits any person from "imped[ing] an individual from communicating directly with the [SEC] about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement…." 17 C.F.R. § 240.21F–17(a). Additionally, if the individual who has initiated communications with the SEC works for an entity that has counsel, Rule 21F-17 states that the SEC may communicate directly with that individual without the consent of the entity's counsel. 17 C.F.R. § 240.21F–17(b).
In light of the SEC's recent enforcement activity involving Rule 21F-17, this post aims to provide a brief overview of the rule's purpose, history and enforcement evolution.
Rule 21F-17 is significant because the SEC has stated that whistleblowing is critical to its enforcement program, and therefore has adopted a strong policy favoring both the prophylactic and reactive protection of whistleblowers. See, e.g., Office of the Whistleblower, U.S....
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