On January 16, the U.S. Securities and Exchange Commission (SEC) announced a record $18 million sanction against JP Morgan for Rule 21F-17(a) violations, sending the strongest message yet that the SEC is cracking down on restrictive non-disclosure agreements and other attempts to muzzle whistleblowers. In recent months, the agency has increased its enforcement of Rule 21F-17(a), which prohibits a person or company from taking any action impeding the ability of an individual to blow the whistle to the Commission.
According to the SEC, JP Morgan regularly asked retail clients who had been issued a credit or settlement from the firm of more than $1,000 to sign confidential release agreements which “required the clients to keep confidential the settlement, all underlying facts relating to the settlement, and all information relating to the account at issue.” The Commission claims that “even though the agreements permitted clients to respond to SEC inquiries, they did not permit clients to voluntarily contact the SEC.”
The $18 million penalty is the largest ever levied by the SEC for violations of Rule 21F-17(a). In September, the agency fined D.E. Shaw $10 million for violating Rule 21F-17(a) through restrictive non-disclosure agreements. Prior to this, the largest penalty for a Rule 21F-17(a) violation was a $400,000 levied penalty against the Brink’s Company in 2022.
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