Today, eight Democratic members of House Committees on Financial Services and Oversight and Government Reform (OGR) called on the Securities and Exchange Commission (SEC) to send a strong message that corporate practices to deter whistleblowers from reporting violations of securities laws will not be tolerated.
In a letter to SEC Chair Mary Jo White, Financial Services
Ranking Member Maxine Waters (D-CA) joined with Oversight and Government Reform
Ranking Democrat Elijah Cummings (D-MD) and six others to express concern about reports of the use of overly restrictive nondisclosure agreements and other employment arrangements that serve to deter whistleblowers. The practice, they assert, could serve as a threat to the effectiveness of the SEC’s Whistleblower Program, created under the Wall Street Reform and Consumer Protection Act.
The lawmakers called on White to ensure the SEC enforces its regulations protecting corporate whistleblowers, and make clear that confidentiality agreements should be structured as narrowly as possible, including by clearly informing employees that they in no way restrict their right to voluntarily report securities law violations to the Commission. The lawmakers urge the SEC to take all necessary action, and request information about efforts the Commission is currently taking.
“Taken together, preemptive legal maneuvering to silence prospective whistleblowers and retaliation against known whistleblowers undermine the continued success of the SEC’s Whistleblower Program and its crucial role in protecting investors. We urge the Commission to send a strong message to industry, including by bringing enforcement actions if necessary, that such acts will not be tolerated.”
The SEC’s Office of the Whistleblower Protection has seen significant success in just the few years since it was launched, with more than 6,000 whistleblower tips, complaints, and referrals sent to the SEC from every state and 55 countries around the world. Moreover, in just the last fiscal year, 139 enforcement judgments and orders have been issued.
In addition to Waters and Cummings, the letter was signed by Reps. Gwen Moore (WI), Jackie Speier (CA), Keith Ellison (MN), Tammy Duckworth (IL), Stephen Lynch (MA) and Matt Cartwright (PA).
Text of the letter is below. A signed copy can be found
online here.
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October 27, 2014
The Honorable Chair Mary Jo White
US Securities and Exchange Commission
100 F Street, NE
Washington DC 20549
Dear Chair White:
We write to strongly encourage the Commission to enforce its regulations protecting corporate whistleblowers and ensure that this Dodd-Frank Act program will continue to be a success in the years to come. In particular, we are concerned about reports that some corporate practices may deter whistleblowers from reporting violations of the securities laws, thereby threatening the effectiveness of the SEC’s Whistleblower Program.
The Commission’s efforts to launch the Office of the Whistleblower Protection, as well as to integrate this office with the Commission’s examination and enforcement functions, have already yielded considerable fruit. More than 6,000 whistleblower tips, complaints, and referrals have been sent to the SEC from every state, as well as from 55 countries around the world. The Commission has also made considerable progress taking action on such intelligence, with 139 enforcement judgments and orders issued during just the last fiscal year. Whistleblowers have also seen the merit of their assistance, receiving more than $50 million since the program began.
And yet, this success may be fleeting if corporate actions that chill the environment for whistleblowers are not promptly and adequately addressed. A recent Washington Post article (“Workplace Secrecy Agreements Appear to Violate Federal Whistleblower Laws,” 6/29/14) described the proliferation of agreements that may limit or restrict employees’ rights to report misconduct. While there are legitimate reasons for companies to use confidentiality agreements to protect sensitive information, such agreements should be structured as narrowly as possible. Employees should also be clearly informed that these agreements in no way restrict their right to voluntarily report securities law violations to the Commission. The use of confidentiality agreements, attestations, and other employment arrangements that do not abide by these principles appears to be in direct contravention to the SEC Rule 21F-17 that nothing shall “impede communications to the Commission about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement.”
We also are concerned by a growing body of anecdotal evidence describing retaliation through litigation and on-the-job harassment, which if left unaddressed, will also deter future reporting of securities violations.
Taken together, preemptive legal maneuvering to silence prospective whistleblowers and retaliation against known whistleblowers undermine the continued success of the SEC’s Whistleblower Program and its crucial role in protecting investors. We urge the Commission to send a strong message to industry, including by bringing enforcement actions if necessary, that such acts will not be tolerated.
Please promptly inform us about the efforts the Commission is taking, as well as any challenges the Commission is facing in addressing these issues.
Sincerely,
Maxine Waters, Ranking Member, Committee on Financial Services
Elijah Cummings, Ranking Member, Committee on Oversight and Government Reform
Gwen Moore, Committee on Financial Services
Jackie Speier, Committee on Oversight and Government Reform
Keith Ellison, Committee on Financial Services
Tammy Duckworth, Committee on Oversight and Government Reform
Stephen Lynch, Committee on Financial Services
Matt Cartwright, Committee on Oversight and Government Reform
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