Earlier this month, at the SEC’s annual SEC Speaks conference, leaders of the Commission gathered to address a wide range of topics, including various plans to carry out the rulemaking agenda established under Dodd-Frank and the SEC’s efforts to uncover harmful practices in an increasingly complex market.
Sharon Binger, Director of the SEC’s Philadelphia regional office, addressed the latest developments in the Commission’s Whistleblower and Cooperation Programs. In particular, she cited In the Matter of KBR, Inc
, in which case the SEC charged a company for using overly restrictive language in confidentiality agreements to hinder whistleblowers. The agreements, which the company required witnesses in internal investigations to sign, threatened disciplinary action or termination if the employees discussed the matters with outside parties without first gaining approval from KBR’s legal department. In her speech, Ms. Binger stated that she expected the Commission to pursue more of these types of cases, as the SEC continues to support and protect the Whistleblower Program.
The use of these illegal confidentiality agreements are a clear indication that some employers will take extreme measures to prevent employees from speaking out against misconduct. In a survey
of U.S. and UK financial services professionals we conducted last year together with the University of Notre Dame, we were dismayed to find that one in every five respondents believed their company’s confidentiality policies and procedures barred the reporting of potential illegal or unethical activities directly to law enforcement or regulatory authorities. Perhaps even more alarming was that among those earning more than $500,000 a year, approximately one in four respondents said they had signed or had been asked to sign a confidentiality agreement that would prohibit reporting illegal or unethical activities to the authorities.
However, as Ms. Binger made clear, corporations cannot prevent an individual from engaging with his or her government and the whistleblower program has proven a powerful weapon against corruption. In fiscal 2015 the number of whistleblower tips increased by 30% compared to fiscal 2014 and the whistleblower program continues to act as a robust source for SEC investigations. Through their first-hand knowledge, whistleblowers provide early and actionable intelligence of potential wrongdoing to the SEC and help minimize damage to investors and the markets. By empowering, protecting, and incentivizing whistleblowers, the program is a critical tool to ensure fairness and transparency in our financial system. To learn more about the SEC Whistleblower Program, see here