Sec Whistleblower Severance Agreement

SEC Chair Mary Jo White previously acknowledged that the SEC does not attempt to undermine companies` ability to protect trade secrets or other confidential information through “duly entered into” agreements. “The SEC as the whistleblower`s Advocate” (April 30, 2015) discussed in the forum here. Later in that same speech, however, White said a properly concluded agreement should ensure that employees “understand that it is always permissible to report potential violations of the Securities Act to the Commission.” The comparison of these comments with the BlueLinx order indicates that the SEC should likely take the position that an agreement that is otherwise “duly drawn” may nevertheless violate Rule 21F-17 if it contains standard language of trust, but does not have an explicit separation excluding any intention to prevent the employee from engaging in whistleblowing activities. If you have been invited to sign such an agreement or if you have already signed such an agreement and would like to understand how the rules may apply to you, we advise you to contact a lawyer. You can also send us a copy of your agreement, if you wish, by submitting it in the form of a tip, either via our online portal or by post or fax. On August 16, 27, 2016, the SEC passed a forbearance settlement against Health Net, Inc., in a similar case, but which contained even more explicit language that the company itself had removed. In August 2011, following the coming into force of Rule 21F-17, Health Net amended its severance pay agreements to “expressly waive an outgoing employee`s right to make an original request for information pursuant to Section 21F of the Securities Exchange Act of 1934.” In June 2013, Health Net revised the severance pay agreement to remove language that expressly prohibits employees from applying for SEC whistleblower awards, and added a provision stating that “[n]othing is designed to prevent the employee from communicating directly with a state supervisory authority, to cooperate with it or to communicate information to it.¬†Therefore, employers should carefully review their current agreements and, in certain circumstances described below, inform signatories to earlier, more restrictive agreements that these restrictions are now lifted. In the agreement, the entity may also provide a cross-reference to a corporate policy containing the information contained in the paragraph above. Companies should continue to have guidelines and agreements in place to protect the disclosure of trade secrets and confidential information to all others, except in the circumstances covered by the DTSA. These enforcement measures confirm that the SEC continues to focus on protecting the rights of whistleblowers. Companies should review all forms of agreements with employees, including model agreements and authorisations, to ensure that the conditions do not prohibit an employee from exercising legally protected information rights and should consider explicit exclusion to that effect. That sounds smart, even though the SEC would likely expand the scope of Rule 21F-17 if it tried to ban conventional privacy languages implemented for lack of reason to believe an employee is a potential whistleblower. The Dodd-Frank Act of 2010 established whistleblowing programs for the SEC and the Commodity Futures Trading Commission.

Under the SEC`s whistleblower program, authorized whistleblowers who provide the SEC with unique and useful information about securities law violations can receive significant bonuses of 10 to 30 percent of a fine of more than $1 million. Remove all language that prevents a former staff member from contacting, communicating with, or cooperating with government authorities, including the SEC. Do not include waiver of whistleblower bonuses or financial recovery based on/as part of communicating with government authorities or require the former employee to lose a portion of severance pay or other benefits if the person engages in whistleblowing activities…

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