As previously discussed, the SEC has interpreted its authority under Dodd-Frank to enable it to enforce Dodd-Frank’s anti-retaliation provisions (see July 2, 2014, newsletter, “SEC Brings First Anti-Retaliation Case Under Dodd-Frank Act Whistleblower Provisions”). According to the Wall Street Journal, the SEC is now focusing on provisions in various standard corporate documents that could be interpreted as preventing whistleblowers from reporting wrongdoing. Under SEC Rule 21F-17(a) “[n]o person may take any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement … with respect to such communications.” According to the Wall Street Journal, the SEC has contacted several corporations seeking “every nondisclosure agreement, confidentiality agreement, severance agreement and settlement agreement entered into with employees since Dodd-Frank went into effect, as well as documents related to corporate training on confidentiality.” (Rachel Louise Ensign, “SEC Probes Companies’ Treatment of Whistleblowers,”Wall Street Journal, Feb. 25, 2015.) In addition, the SEC has also purportedly requested “all documents that refer or relate to whistleblowing,” as well as a list of all terminated employees. Id.
In light of the SEC’s wide-ranging request, companies should review severance agreements, nondisclosure agreements/confidentiality agreements, termination agreements, and settlement agreements to ensure that they do not contain language that could be interpreted as preventing whistleblowers from reporting suspected wrongdoing. Problematic language could range from an explicit prohibition on an employee speaking to regulators unless the company is first informed of the content of what is going to be disclosed, to generic confidentiality language that prohibits the disclosure of certain information unless compelled by legal process. Companies should also review training materials and investigation protocols to ensure that cautionary language regarding confidentiality cannot be interpreted as conflicting with SEC Rule 21F-17(a).