SEC Official Sees Drop in Anti-Whistleblower Severance Deals

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By Andrew Ramonas

The SEC is “definitely not seeing” as many companies using separation agreements intended to stop departing employees from becoming whistleblowers as it once did, a senior SEC official told Bloomberg BNA Oct. 16.

Jane Norberg, chief of the Securities and Exchange Commission Office of the Whistleblower, said she is hopeful companies have taken notice of enforcement actions against corporations whose severance agreements or other workplace contracts included provisions that discouraged employees from telling the SEC about potential securities law violations.

Speaking earlier at the Association of Corporate Counsel’s annual meeting in Washington, Norberg told in-house lawyers the SEC has brought nine enforcement actions related to Rule 21F-17, which has specifically prohibited confidentiality agreements impeding whistleblowing since 2011.

“There’s really no longer an excuse not to have those agreements in compliance with the law,” Norberg said.

Asset manager BlackRock Inc. and financial services company HomeStreet Inc. are among the most recent targets of enforcement actions under 1934 Securities Exchange Act Rule 21F-17, which stems from the Dodd-Frank Act.

BlackRock in January agreed to pay $340,000 to settle SEC allegations that its separation agreements improperly required departing employees to waive their rights to a whistleblower award. At around the same time, HomeStreet agreed to pay $500,000 to settle SEC claims it impeded potential whistleblowers in its severance agreements, among other allegations.

“I think it’s always a good idea to make sure that all of your agreements are in compliance with the law as it currently stands,” Norberg said at the ACC gathering.

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