Quick Hits

• The SEC fined an employer $10 million in a settlement over charges that nondisclosure and confidentiality agreements impeded reporting of potential securities law violations.
• The settlement is part of a spate of enforcement actions against companies to protect the SEC’s whistleblower program.

In September 2023, the SEC announced it had settled charges with New York-based registered investment adviser D.E. Shaw & Co., L.P., for impeding its whistleblower program.

The SEC alleged that for years D.E. Shaw had required new employees to sign employment agreements that prohibited the disclosure of confidential information to third parties without including an exception for reporting potential securities violations to the SEC.

Additionally, the SEC alleged the firm required approximately 400 employees to sign releases in separation agreements to affirm that they had not lodged any complaints with any government agency or department as a condition of receiving deferred compensation and other financial benefits sometimes totaling millions of dollars.

Without admitting or denying the SEC’s findings, the firm agreed to pay $10 million to settle the charges and agreed to cease and desist from future violations.

Whistleblower Protections

The SEC’s settlement with D.E. Shaw was at least the third in 2023 with companies alleged to have used restrictive language in employment agreements and separation agreements that allegedly discouraged employees and former employees...

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