Posts tagged SEC.
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On November 14, 2023, the Securities and Exchange Commission (“SEC”) announced its enforcement results for fiscal year 2023, boasting increases in enforcement and financial remedies across all of its programs. The SEC filed a staggering 784 enforcement actions, obtained orders for nearly $5 billion in financial remedies, and distributed nearly $1 billion to harmed investors.

The SEC’s most notable results, however, came from its Whistleblower Program: In fiscal year 2023, the SEC issued whistleblower awards totaling nearly $600 million, the most ever awarded in one ...

Blogs
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As featured in #WorkforceWednesday: This week, we’re focusing on three recent Securities and Exchange Commission (SEC) charges against employers for violating whistleblower protection laws and how all employers should take extra steps to ensure compliance in their separation agreements:

Recent charges issued by the SEC represent a dramatic change in the enforcement of whistleblower protections. Epstein Becker Green attorney Greg Keating explains how this can impact all employers, both public and private, and should encourage them to take a closer look at their ...

Blogs
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Less than two weeks after it last penalized a private employer for alleged violations of whistleblower protection rules in its employee separation agreements, the Securities and Exchange Commission (“SEC”) once again takes aim at the language of a separation agreement it alleges violates Rule 21F-17(a) of the Exchange Act (“Rule 21F”). Just yesterday, the SEC issued an Order settling charges with a commercial real estate services and investment firm for such violations through a fine of $375,000, among other terms. The SEC’s aggressive and continued ...

Blogs
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The Securities and Exchange Commission (“SEC”) continues to aggressively enforce its whistleblower program under the Biden Administration. As we have reported (here and here), the SEC has cracked down on employers’ agreements and procedures that it contends interfere with employee access to the SEC. Most recently, on September 8, 2023, the SEC issued an Order imposing a $225,000 penalty to a private energy and technology company, Monolith Resources LLC (“Monolith”), for allegedly violating whistleblower protection rules in its employee separation ...

Blogs
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Under the Biden Administration, the Securities and Exchange Commission has aggressively enforced its Whistleblower Program.  As we previously reported here and here, the SEC has increased its focus on employers’ agreements or procedures that it contends interfere with employee access to the SEC.  More recently, the SEC has for the first time turned its attention toward employer compliance programs with draconian results for employers whose internal compliance efforts do not pass muster.  Specifically, on February 3, 2023, the SEC announced a dizzying $35 million fine against Activision Blizzard, Inc. (“Activision”), a video game developer, largely for failing to implement an effective compliance system to process and track workplace misconduct complaints.  Activision’s fine also included a violation for including a “Notice Clause” in the separation agreement template that it used between 2016 and 2021.  We discuss each violation below and what this means for SEC-regulated employers going forward.

Blogs
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Exchange Act Rule 21F-17, adopted in 2011 under the auspices of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, prohibits any person from taking any action to impede an individual from communicating directly with the SEC, including by “enforcing, or threatening to enforce, a confidentiality agreement . . . .”  The SEC has prioritized enforcing this rule expansively, by requiring employers to provide SEC-specific carveouts to policies and agreements governing confidentiality.  According to an Order issued last week against The Brink’s Company ( “Brink’s” or “Brinks”), the SEC seems to suggest that employers must provide a specific carveout in restrictive covenant agreements permitting employees and former employees to report information to the SEC in addition to the statutory disclosure provided for in the federal Defend Trade Secrets Act (DTSA).

Blogs
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The Securities and Exchange Commission’s Whistleblower Program under the Biden administration has picked up where it left off under President Obama, aggressively enforcing Rule 21F-17(a) against employers whose policies may impede employees from communicating with the SEC.  On June 23, 2021, the SEC fined Guggenheim Securities, LLC (“Guggenheim”) for maintaining a policy that it contended impeded potential whistleblowers from communicating with the SEC by requiring employees to obtain permission before reporting securities violations. Even though the SEC was unaware of any instances in which a Guggenheim employee was prevented from reporting a potential securities law violation or in which Guggenheim acted to enforce the policy, the SEC nevertheless found that the company had violated Rule 21F-17(a).

Blogs
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Recently, the U.S. Securities and Exchange Commission’s (“SEC”) Office of Compliance Inspections and Examinations (“OCIE”) issued a Risk Alert to provide broker-dealers with guidance on examinations regarding regulation Best Interest (“Reg BI”).  Reg BI requires that when broker-dealers make a recommendation regarding securities to a retail customer it must act in the best interest of the customer, without placing its own financial or other interest ahead of the retail customer’s interest.  The Financial Industry Regulatory Authority (“FINRA”) also ...

Blogs
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On August 20, 2019, the Securities and Exchange Commission (“SEC”) charged Mosaic Capital, LLC, formerly known as AOC Securities, LLC (“AOC”), and its CEO with failing to adequately supervise an employee who engaged in securities fraud.  Pursuant to the SEC Orders, AOC and its CEO were ordered to pay penalties of $250,000 and $40,000, respectively.  The SEC’s actions serve as a reminder to broker-dealers—and members of firm management—of the potential for liability based on the actions of a self-dealing employee, and the need to guard against such activities.

The ...

Blogs
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Broker-dealers (“BDs”) should be aware that, on June 5, 2019, the SEC adopted “Regulation Best Interest” (“Reg BI”), which requires BDs and their registered representatives (“RRs”) to “act in the best interest of the retail customer,” when “making a recommendation” regarding “a securities transaction or investment strategy.”  In addition, the SEC’s new rules require BDs to deliver Form CRS relationship summaries (“Form CRS”) to retail customers.  BDs will need to be in compliance with Reg BI and Form CRS, which were accompanied by more than ...

Blogs
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Featured on Employment Law This Week:  The Securities and Exchange Commission (“SEC”) recently issued the largest whistleblower awards under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) in history.

Affirming the payout of over $49 million to two whistleblowers and over $33 million to a third for information that led to successful securities law prosecutions. Dodd-Frank established the whistleblower "bounty" program in 2010, and the SEC reports that it has awarded more than $262 million so far, to 53 whistleblowers.

Watch the segment ...

Blogs
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On March 19, 2018, the SEC issued an Order jointly awarding two whistleblowers more than $49 million, and awarding a third whistleblower more than $33 million, for reporting information to the SEC that led to its successful prosecution of an enforcement action against the perpetrators of securities violations.

In 2010, the Dodd-Frank Act amended the Securities Exchange Act of 1934 to include Section 21F, entitled “Securities Whistleblower Incentives and Protection.” Among other things, Section 21F established a whistleblower “bounty” program that entitles ...

Blogs
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Featured on Employment Law This Week: Supreme Court: Dodd-Frank Protections Are Limited

Dodd-Frank whistleblower protections are limited - The Supreme Court has ruled that whistleblower protections under the Dodd-Frank Act apply only to those who report violations to the SEC. The Act protects whistleblowers from termination, demotion, and harassment. People who report to the SEC, other regulatory or law enforcement agencies, or to company management are still protected under the 2002 Sarbanes-Oxley Act. Dodd-Frank’s anti-retaliation provision permits whistleblowers ...

Blogs
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On February 21, 2018, the U.S. Supreme Court resolved a circuit split and ruled in Digital Realty Trust, Inc. v. Somers that Dodd-Frank’s anti-whistleblower retaliation provision (15 U.S.C. § 78u–6(h)) does not protect employees who report alleged securities violations only to their employers, and not to the SEC.

Paul Somers ("Somers"), a former Vice President of Portfolio Management for Digital Realty Trust, claimed that his employer violated the whistleblower protections of Dodd-Frank by terminating him in retaliation for complaining to management about suspected ...

Blogs
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Last August, we reported on two significant cease-and-desist orders issued by the SEC that, for the first time, found certain language in the confidentiality and release provisions of separation agreements to violate the SEC’s Rule 21F-17(a), which precludes anyone from impeding any individual (i.e., a whistleblower) from communicating directly with the agency.[1] Since then, the SEC has continued its aggressive oversight of separation and confidentiality agreements, with substantial repercussions for some employers. These orders, a select number of which we summarize ...

Blogs
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A month into the Trump presidency, there have been a number of important statements from the executive branch on the regulation of executive compensation impacting the financial services industry. On February 3, 2017, President Trump issued a statement on the core principles for regulating the U.S. financial system (“Core Principles”). The statement requires the Treasury and all heads of member agencies of the Financial Stability Oversight Council to report within 120 days (by June 3, 2017) all existing laws, treaties, guidance, regulations, etc., that promote the Core ...

Blogs
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Twice in the past two weeks, the Securities and Exchange Commission (“SEC” or “Commission”) issued a cease-and-desist order settling proceedings against companies for using confidentiality and waiver of claims provisions in employee separation or severance agreements that violate an SEC rule promulgated after passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). The rule in question is designed to encourage and allow whistleblowers to freely disclose information to the SEC without impediments and ensure that they are (and ...

Blogs
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Businesses of all sizes and in virtually every industry face the daily threat of a data breach or other cybersecurity event, as well as the challenge of managing the potentially catastrophic economic and reputational harm that can flow from such an incident. Further complicating matters is that these threats can come from any number of sources: hackers, phishers, spammers, bot-network operators, spyware and malware authors, insiders, other nations, organized criminal groups, and terrorists. SEC regulations require registered financial institutions—including ...

Blogs
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One of the featured stories on Employment Law This Week – Epstein Becker Green’s new video program – is the SEC reminder that their bounty program applies to external whistleblowers.

The U.S. Securities and Exchange Commission has awarded $700,000 to a whistleblower who was not employed by the company he exposed. The external whistleblower discovered the issue when he ran a detailed analysis on the company. The agency explained that analysis from “industry experts” is as valuable as insider information. The whistleblower program began after the Dodd-Frank Act was ...

Blogs
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On September 10, 2015, the Second Circuit Court of Appeals ruled in Berman v. Neo@Ogilvy LLC that an employee who reports an alleged securities violation only to his or her employer, and not to the SEC, is nevertheless covered by the anti-retaliation protections afforded by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”).

Berman, a former finance director of Neo@Ogilvy, claimed that his employer and its corporate parent, WPP Group USA, Inc., violated the whistleblower protections of Dodd-Frank by wrongfully terminating him for raising ...

Blogs
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The SEC has become increasingly vigilant and aggressive about what employers say in their confidentiality agreements and the context in which they say it.  We previously cautioned employers when FINRA issued a Regulatory Notice cracking down on the use of confidentiality provisions that restrict employees from communicating with FINRA, the SEC, or any other self-regulatory organization or regulatory authority.  The SEC has now followed suit in In re KBR, Inc., (pdf) the SEC’s first-ever enforcement action against a company for using overly restrictive language in one of its ...
Blogs
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Last week, the U.S. Securities and Exchange Commission’s Office of the Whistleblower, created in 2011 pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, released its mandated report to Congress on operations for Fiscal Year 2014, ending on September 30, 2014.  A number of interesting facts, statistics and developments were reported.  Here is a selection of particularly relevant highlights:

  • FY 2014 was the most active year yet in terms of whistleblower awards. The SEC has made awards to 14 whistleblowers since inception of the program, including 9 in ...
Blogs
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At the Firm’s 33rd Annual Labor and Employment Client Briefing, Lauri Rasnick and John Fullerton spoke on the financial services industry panel about the impact of increased compliance obligations on the employment relationship and developments in the areas of applicant screening, whistleblower complaints, internal investigations, and diversity and inclusion.

Here are a few takeaways from that session:

  • Eleven states have enacted legislation prohibiting the use of consumer credit reports in making employment decisions.  There has been a dramatic increase in state and ...
Blogs
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By Jason Kaufman

The Dodd-Frank Act created a comprehensive whistleblowing program by amending the Securities Exchange Act of 1934 to include Section 21F, entitled “Securities Whistleblower Incentives and Protection,” and establishing the “Office of the Whistleblower” to enforce its provisions.  Individuals who voluntarily provide the SEC with original information that leads to a successful SEC enforcement action resulting in monetary sanctions greater than $1 million are entitled to an award of between 10 and 30 percent of the total sanctions collected.  According ...

Blogs
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By John F. Fullerton III

At the Firm’s 32nd Annual Client Briefing held yesterday, I spoke on the financial services industry panel about the Dodd-Frank bounty program and the whistleblower anti-retaliation provisions of both the Dodd-Frank and Sarbanes-Oxley Acts.  Here are a few takeaways from that session:

  • There have been at least three reported awards from the SEC to anonymous tipsters under the Dodd-Frank bounty program, the most recent of which, earlier this month, was an award of $14 million to a whistleblower whose information led to the recovery of “substantial ...
Blogs
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Guest Post By: H. David Kotz

H. David Kotz is a Managing Director at Gryphon Strategies, a full-service investigation firm, which he joined in January 2012 after serving for over four years as the Inspector General for the SEC.  He was a guest speaker at Epstein Becker & Green’s March 7, 2012 breakfast briefing, 2012’s Key Issues for Financial Services Employers.

The head of the Securities and Exchange Commission’s (SEC’s) Whistleblower program reported on March 14, 2012 that the SEC Whistleblower program has been receiving a continuous volume of complaints since the ...

Blogs
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In previous articles and postings, we have cautioned that legislative policy of the Dodd-Frank Wall Street Reform and Consumer Protection Act threatens to circumvent corporate compliance programs and drive whistleblowers having vital information outside the organization in the hope of receiving rich bounty awards. In a recent article published by Bloomberg Law Reports®, Allen Roberts discusses some of the challenges businesses subject to SEC jurisdiction need to address in the face of the SEC’s Final Rule – mindful that the plaintiffs’ bar has geared up to ...

Blogs
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By David W. Garland and Allen B. Roberts

Major provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) will gain substance and vitality only with amplifying interpretive rules. On December 17 the period closed for submitting comments on rules proposed by the Securities and Exchange Commission (SEC) to implement whistleblower provisions added in a new Section 21F to the Securities Exchange Act of 1934 (Exchange Act). With the comment period having closed, and final rules expected to be implemented in the Spring of 2011, this is a good time to take account of the proposed rules regarding the statute’s anti-retaliation provisions and their potential impact on employers.   

Dodd-Frank authorizes bounty awards to eligible whistleblowers who voluntarily provide original information to the SEC about a violation of the federal securities laws leading to a successful enforcement action and resulting in a monetary sanction exceeding $1,000,000.  It is not surprising that much of the analysis and media attention generated by Dodd-Frank concerns the bases on which the SEC will make determinations about paying potentially enormous bounty awards that can range from 10% to 30% of the amount of monetary sanctions. 

Section 21F also protects whistleblowers against retaliation by their employers, with the scope of protection circumscribed by the statutory definition of a whistleblower.  Rather than providing protection equally for internal disclosures to the employer and external disclosures to authorized agencies and authorities, as is seen commonly in whistleblower statutes, Section 21F protects only certain external disclosures. It defines a whistleblower narrowly as any individual, acting alone or jointly, who provides information relating to a violation of the securities laws to the SEC in the manner prescribed by the SEC.

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