In two recent orders, the U.S. Securities and Exchange Commission (SEC) signaled that it is paying particular attention to attempts by companies to prevent former employees from whistleblowing through restrictive covenants contained in severance agreements.
Section 21F was added to the Dodd-Frank Wall Street Reform and Consumer Protection Act to “encourage whistleblowers to report potential violations of the securities laws by providing financial incentives, prohibiting employment-related retaliation, and providing various confidentiality guarantees.”1 Since the SEC started allowing whistleblowers to receive financial incentives for reporting securities law violations, it has paid over $100 million in whistleblower awards.2 Most recently, on Aug. 30, 2016, the SEC paid a $22.4 million whistleblower award—the second largest whistleblower award to date—to a financial executive for reporting accounting fraud by Monsanto Co.3 This executive’s action led to an $80 million settlement between the SEC and Monsanto.4
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