On September 8, the U.S. Securities and Exchange Commission (SEC) announced that it settled charges against Monolith Resources LLC, a privately held technology and energy company headquartered in Nebraska. The SEC’s enforcement action alleged that Monolith had been using restrictive employee separation agreements that violated the SEC Whistleblower Protection Rule 21F-17. Without admitting or denying the SEC’s findings, Monolith agreed to revise its separation agreements and pay a $225,000 penalty, among other remedial actions.
Though the SEC has previously dealt with similar allegations regarding whistleblower restrictions in companies’ separation agreements, the SEC’s press release highlighted the fact that it was charging a privately held company with violating Rule 21F-17, something that it has not often done.
Background
Monolith is a privately held Delaware company headquartered in Lincoln, NE.
According to the SEC’s order, Monolith’s separation agreements required certain departing employees to waive their right to receive monetary awards for filing or participating in investigations by governmental agencies. While the agreements did not prohibit employees from filing charges or claims with governmental agencies, the SEC alleges that the language prohibiting employees from receiving financial incentives created an impediment to participation in the SEC Whistleblower Program.
The SEC stressed that financial incentives are meant to encourage whistleblowers to report...
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