The U.S. Securities and Exchange Commission (SEC) in recent years has taken an aggressive stance against employers over employment agreements that the agency believes impede its whistleblower program—as highlighted by a $10 million fine in 2023 imposed on an investment firm over its inclusion of nondisclosure and confidentiality provisions.
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...
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