Clifford Chance

SEC Charges Company for Language in Confidentiality Agreements

1 April 2015

SEC announces language in confidentiality agreement violates Dodd-Frank whistleblower protection. 
 

On April 1, 2015, the U.S. Securities and Exchange Commission ("SEC") announced its first enforcement action against a company for including language in its confidentiality agreements that violates the whistleblower protections of Rule 21F of the Securities Exchange Act of 1934 ("Rule 21F"), established by the Dodd-Frank Act.  According to the SEC, the company subject to the enforcement action, a U.S. issuer, required witnesses in some of the company's internal investigations to sign confidentiality agreements containing language that the SEC believes violates Rule 21F.  Rule 21F-17 prohibits "any action to impede an individual from communicating directly with the Commission staff about a possible securities fraud violation, including enforcing, or threatening to enforce, a confidentiality agreement."

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