Clifford Chance

The SEC's Recent Whistleblower Enforcement Actions Highlight The Need For Private And Public Company Vigilence Over Employee Separation Agreement Terms

November 3, 2023

In an address to the New York City Bar Association's Compliance Institute on October 24, 2023, the Director of the Security and Exchange Commission's Enforcement Division, Gurbir S. Grewal, warned companies about the SEC's continuing and heightened enforcement of whistleblower protections. The address came after notable shifts in the SEC's enforcement practices under the Biden Administration and an increased focus on whistleblowing domestically and abroad. Originating from the 2010 Dodd-Frank Act, whistleblower protection rules (known formally as Rule 21F-17) prevent companies from taking actions that impede employees from reporting possible securities law violations to the SEC. In September 2023, the SEC issued the largest standalone penalty of $10 million for a company's overbroad post-employment confidentiality provision under the rule.  Grewal's recent address provided guidance regarding the SEC's broad application of the rule and the increased need for compliance vigilance over the clauses used in employee separation agreements.

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