The SEC has brought its first case for whistleblower protection violations involving Rule 21F-17. The Commission claims that KBR Inc. used language in confidentiality agreements that were improperly restrictive and could potentially impede the whistleblower process.
According to the regulator, KBR required that witnesses involved in certain internal investigative interviews sign confidentiality statements that contained language warning about potentially disciplinary action, including termination, if the matters involved were discussed with an external party without the legal department’s approval. Such probes typically involved claims of possible securities law violations. Because of this, the agency said the terms violated the rule, which bars companies from getting in the way of whistleblowers being able to report securities law violations to the Commission.
To settle, KBR will pay a $130,000 penalty. The company, however, is not denying or admitting to the charges. It did voluntarily consented to modify its confidentiality statement to include language that lets employees know they can report possible violations to federal agencies without the company’s approval or fear of reprisal. KBR also agreed to cease and desist from future Rule 21F-17 violations.
The SEC said there doesn’t appear to be any instances when KBR specifically stopped an employee from notifying the SEC about possible securities law violations. Still, any kind of blanket prohibition could have a chilling effect that might prevent a potential whistleblower from stepping forward.
Read the Order (PDF)
More Blog Posts:
SEC News: Regulator Grants $30M Whistleblower Award and Charges Washington Investment Advisory Firm $600K for Undisclosed Principal Transaction, False Advertising, Stockbroker Fraud Blog, September 23, 2014
Barclays Must Pay Former Trader $9M, Ex-Raymond James Broker Gets Back $650K Award, Institutional Investor Securities Blog, April 6, 2015
Two Firms Charged in Texas With Running Fraudulent Commodity Pool Must Pay Over $7.5M, Stockbroker Fraud Blog, April 6, 2015