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Seattle-based financial services company HomeStreet Inc. has agreed to pay $500,000 to resolve Securities and Exchange Commission allegations it ran afoul of whistle-blower protection rules ( In re HomeStreet, Inc. , S.E.C., No. Admin. Proc. File No. 3-17801, 1/19/17 ).
The announcement marks the second time in a week that the agency penalized a company for allegedly attempting to impede former employees from sharing information with the commission. Previously, BlackRock Inc. paid $340,000 to settle claims that it improperly forced departing employees to waive their rights to obtain whistle-blower awards. HomeStreet’s penalty also reflects the agency’s allegations that it engaged in faulty hedge accounting practices. In settling, HomeStreet neither admitted nor denied wrongdoing.
According to the SEC, from 2011 to 2014, HomeStreet made unsupported adjustments to its hedge effectiveness testing to ensure that the company could continue using the favorable accounting treatment, resulting in inaccurate accounting entries.
Companies are required to periodically assess their hedge accounting and must discontinue its use if the effectiveness ratio falls outside a certain range, the SEC said.
HomeStreet’s treasurer Darrell van Amen separately agreed to pay a $20,000 penalty to settle charges that he caused the accounting violations, the SEC said in its Jan. 19 release.
After company employees expressed concerns about accounting errors to management, and the SEC requested documents, HomeStreet took actions to determine the identity of any potential whistle-blowers, the SEC said. It also required departing employees to sign severance agreements waiving potential whistle-blower awards or risk losing their severance payment benefits, the SEC said.
Under 1934 Securities Exchange Act Rule 21F-17, the use of confidentiality agreements designed to prevent individuals from communicating with the commission about potential securities violations are specifically prohibited.
To contact the reporter on this story: Antoinette Gartrell in Washington at firstname.lastname@example.org
To view the order, visit: https://www.sec.gov/litigation/admin/2017/34-79844.pdf
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