SEC Continues Enforcement Initiative, Finds Non-Disparagement Clauses in Severance Agreements Restricting Communications with Regulators Violate Whistleblower Protections

The U.S. Securities and Exchange Commission’s (“SEC”) Rule 21F-17 prohibits any action impeding an individual from communicating directly with the SEC about a possible securities law violation.

In October 2016, the SEC Office of Compliance Inspections and Examinations announced that enforcement of this Rule would be a priority for the SEC. Two recent SEC orders, resulting in fines for NeuStar, Inc. and SandRidge Energy, Inc., demonstrate that the SEC intends to pursue this initiative by taking action involving severance agreements that ostensibly prohibit former corporate employees from communicating with the SEC.

In light of these decisions, employers should closely review their severance agreements for similar clauses restricting former employees from communicating with the SEC and, where necessary, revise those agreements to comply with whistleblower protections.

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