The Securities and Exchange Commission awarded more than US $22 million to a whistleblower for voluntarily providing original information that “helped the agency halt a well-hidden fraud at the company where the whistleblower worked.” This is the second largest whistleblower award every awarded by the SEC, which now has awarded over US $107 million in whistleblower awards since establishing its whistleblowing program in 2011. Separately, the Commodity Futures Trading Commission proposed to amend its whistleblower program to more closely emulate that of the SEC. Among other things, the CFTC proposed (1) new procedures to review whistleblower claims; (2) to clarify that the CFTC may bring enforcement actions against any employer that violates its anti-retaliation provisions; and (3) to prohibit any agreement or condition of employment, including a confidentiality or pre-dispute arbitration agreement, from containing a provision that might “impede” an individual from communicating a possible violation of law to CFTC staff. Comments to the CFTC’s proposed amendments will be accepted through September 29.
Compliance Weeds: Recently, the SEC has sanctioned two publicly traded companies for including in their standard severance agreements language that the Commission determined potentially impeded employees from disclosing to the SEC a possible securities law violation. (Click here for background regarding the most recent SEC enforcement actions in the article, “Another Publicly Traded Firm Sanctioned by SEC for Allegedly Undercutting Whistleblower Protections Through Severance Agreements” in the August 21, 2016 edition of Bridging the Week.) Both the SEC and CFTC have express rules that prohibit the waiver of the right of any person to file a whistleblower complaint with the agencies and receive a monetary award. (Click here to access CFTC Rule 165.19 and here to access SEC Rule 240.21F-17.) Employees also may not be retaliated against for whistleblowing. (Click here, e.g., to access Section 23(h)(1) of the Commodity Exchange Act, 7 USC §26(h)(1) and here for Part A to Part 165 of the CFTC Rules.) The CFTC's proposed rule amendments are aimed at enhancing its current requirements and streamlining internally the processing of whistleblower claims. SEC and CFTC registrants and SEC-regulated publicly traded companies should review their form employment and severance agreements to ensure they are consistent with regulatory requirements regarding employee and ex-employee whistleblower rights.