The U.S. Securities and Exchange Commission is looking at whether companies are stifling corporate whistleblowers. The regulator has submitted letters to companies to request a number of documents, including employment contracts, nondisclosure agreements, confidentiality deals, and settlement agreements entered into since the Dodd-Frank Act became law. SEC officials are worried that there has been a backlash against whistleblowers.
Some of the documents come with clauses that get in the way of an employee notifying the government about wrongdoing at the company, as well as about other securities law violations. Firms may even demand that employees give up their rights to benefits from government investigations, which takes away the incentive that is provided by the SEC whistleblower program.
Under the SEC whistleblower program, tipsters may be entitled to receive 10-30% of penalties collected if the information provided results in an enforcement action that brings in sanctions of over $1 million. In 2014, the regulator looked at over 3,600 tips about possible securities law violations. The number of tips has gone up in recent years. The Dodd-Frank Act bars companies from getting in the way of employees submitting such tips.