SEC Settles Enforcement Proceedings Against Adviser for Alleged Whistleblower Protection Rule Violations
On September 26, 2024, the SEC announced the settlement of administrative proceedings brought against a registered investment adviser for various alleged violations of Rule 21F-17(a) under the Securities Exchange Act of 1934, also known as the Whistleblower Protection Rule, including entering into agreements with candidates for employment and a former employee that made it more difficult for them to report potential securities law violations to the SEC.
The SEC alleged that, from November 2020 through September 2023, the adviser entered into non-disclosure agreements (NDAs) with 12 candidates for employment that prohibited them from disclosing, including to government agencies specifically, that they had confidential information about the adviser. The SEC order states that, while the NDA permitted the candidates to respond to requests for information from the SEC, it required notification to the adviser of any such request and prohibited the candidates from responding to requests arising from a candidate’s voluntary act of disclosure.
The SEC also alleged that the adviser entered into a settlement agreement with a former employee that, while permitting the reporting of possible securities law violations to government agencies, required the former employee to affirm that such former employee had not sought to initiate any investigation by any governmental agency, was aware of no facts that would form the basis of such an investigation and would withdraw any statements already made that would form the basis of an investigation.
Without admitting or denying the allegations, the adviser agreed to cease and desist from future violations, to be censured and to pay a civil monetary penalty in the amount of $500,000. In agreeing to the settlement, the SEC considered the remedial acts promptly undertaken by the adviser, including cooperation with and voluntary submission of documents to the SEC as part of the investigation, ceasing to use the violative provisions in its NDAs, terminating the NDAs of the candidates, and notifying the former employee that the settlement agreement does not prohibit providing information and/or documents to, and/or communicating with, SEC staff, without notice to or approval from the adviser.
The SEC’s order is available here and a related press release is available here.
Vedder Thinking | Articles SEC Settles Enforcement Proceedings Against Adviser for Alleged Whistleblower Protection Rule Violations
Newsletter/Bulletin
October 10, 2024
On September 26, 2024, the SEC announced the settlement of administrative proceedings brought against a registered investment adviser for various alleged violations of Rule 21F-17(a) under the Securities Exchange Act of 1934, also known as the Whistleblower Protection Rule, including entering into agreements with candidates for employment and a former employee that made it more difficult for them to report potential securities law violations to the SEC.
The SEC alleged that, from November 2020 through September 2023, the adviser entered into non-disclosure agreements (NDAs) with 12 candidates for employment that prohibited them from disclosing, including to government agencies specifically, that they had confidential information about the adviser. The SEC order states that, while the NDA permitted the candidates to respond to requests for information from the SEC, it required notification to the adviser of any such request and prohibited the candidates from responding to requests arising from a candidate’s voluntary act of disclosure.
The SEC also alleged that the adviser entered into a settlement agreement with a former employee that, while permitting the reporting of possible securities law violations to government agencies, required the former employee to affirm that such former employee had not sought to initiate any investigation by any governmental agency, was aware of no facts that would form the basis of such an investigation and would withdraw any statements already made that would form the basis of an investigation.
Without admitting or denying the allegations, the adviser agreed to cease and desist from future violations, to be censured and to pay a civil monetary penalty in the amount of $500,000. In agreeing to the settlement, the SEC considered the remedial acts promptly undertaken by the adviser, including cooperation with and voluntary submission of documents to the SEC as part of the investigation, ceasing to use the violative provisions in its NDAs, terminating the NDAs of the candidates, and notifying the former employee that the settlement agreement does not prohibit providing information and/or documents to, and/or communicating with, SEC staff, without notice to or approval from the adviser.
The SEC’s order is available here and a related press release is available here.
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