The U.S. Securities and Exchange Commission’s settlement with KBR Inc. earlier this month is a clear signal that the commission plans to make good on a promise to crack down on employment agreements that could be viewed as an attempt to keep fraud complaints in-house, according to Ada Dolph, Christopher Robertson and Robert Milligan of Seyfarth Shaw.
This week, the authors note that Sean McKessy, SEC Office of the Whistleblower chief, made additional remarks regarding the KBR order, intimating that “public companies as well as private companies that contract with public companies should immediately review their agreements for compliance.” Some key takeaways from McKessy’s speech:
- Pay attention to SEC Rule 21F-17: The rule forbidding “any action” toward a whistleblower should be interpreted as “very broad,” according to McKessy. He said he reads it as stating, “’no person shall take any action’ to impede an individual from communicating directly with the SEC,” say the authors.
- Private companies are not immune: The SEC hasn’t taken an official position, but it’s possible the same ramifications that shaped the KBR deal could be applied to private companies that contract with public ones.
- Agreement review is a priority: McKessy said reviewing employment agreements will remain a priority with the SEC, and the agency will continue to take affirmative steps to protect whistleblowers.
