The Securities and Exchange Commission (“SEC”) levied an $18 million fine against J.P. Morgan Securities, LLC (“JPMS”) for allegedly including overbroad release provisions in settlement agreements. This marks the continuation of its recent activity to enforce SEC Rule 21F-17(a), a regulation that prohibits companies from taking any action to impede or discourage whistleblowers from reporting suspected securities violations to the SEC.
The rule broadly prohibits any person from taking any action to prevent an individual from contacting the SEC directly to report a possible securities law. Specifically, the rule provides that “[n]o 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.”
However, Rule 21f-17(a) does not create a private right of action. And, as we previously blogged, the SEC historically had limited enforcement activity for Rule 21F-17(a), with roughly 14 enforcement actions between 2015 and 2021. Many of those enforcement actions occurred in the context of alleged retaliation by a company against an employee for communicating with the SEC, or attempting to impede an employee’s ability to communicate with the SEC as part of an investigation.
But with the 2020 change in administration, the SEC began making up for lost time and—most importantly—...
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