Proskauer Partner Connie N. Bertram, co-head of the Whistleblowing & Retaliation Practice, participated in a webinar last week with Sean McKessy, Chief of the SEC’s Office of the Whistleblower. The webinar, sponsored by the American Bar Association, was entitled “New Developments in Whistleblower Claims and the SEC.” The participants discussed the Supreme Court’s recent decision in Lawson, the scope of protected activity and adverse employment action under SOX, and whether internal reports are protected under Dodd-Frank. The participants also discussed recent Dodd-Frank bounty recoveries, including a recovery by a controller of a publicly-traded company that had been announced that morning.
The participants also explained that the SEC’s Office of the Whistleblower has been active in reviewing employment and separation agreements to assess whether any provisions could potentially chill reporting to the SEC and other government agencies. The panelists discussed at length the SEC’s recent order finding that a publicly-traded company’s confidentiality agreement used in internal investigations ran afoul of SEC Rule 21F-17.
Mr. McKessy emphasized that now is the time for companies to review their current severance and confidentiality agreements as well as applicable codes of conduct to verify that they do not run afoul of SEC regulations regarding potential whistleblower activity. He stated that the SEC views Rule 21F-17 as “very broad,” preventing a company from taking “any action” to limit an individual communicating directly with the SEC. He also noted that language now used by the publicly-traded company in the recent order would not necessarily constitute “safe harbor” language for other companies. Mr. McKessy emphasized that contract language would always be analyzed by the SEC in context. Mr. McKessy also noted that the SEC may take the position that, in light of the Lawson decision, non-public contractors of publicly-traded companies must comply with Rule 21F-17.
In addition to discussing recent case law developments, Ms. Bertram explained to the participants that, given the SEC’s recent enforcement activities and pronouncements, it was critical for companies to undertake a comprehensive review of their existing agreements and revise them to comport with the SEC’s recommendations. She also noted that other federal departments and agencies, including the DOD, were taking steps to regulate and investigate employee confidentiality and non-disparagement provisions. Ms. Bertram and other panelists also provided practical tips for managing multiple whistleblower and enforcement claims and investigations, for conducting effective internal investigations, and for handling whistleblower claims by current employees.