Tag Archives: Benjamin Calitri

CFTC Begins Its Enforcement of NDA Rule with Action Against Trafigura

by Benjamin Calitri

Benjamin Calitri

Photo courtesy of the author

On June 17, 2024, Trafigura Trading LLC (“Trafigura”) agreed to pay $55 million to settle charges brought by the Commodity Futures Trading Commission (“CFTC”) that they “traded gasoline while in knowing possession of material nonpublic information, . . . manipulated a fuel oil benchmark to benefit its futures and swaps positions,” and notably that they violated CFTC Regulation 165.19(b) by “requir[ing] its employees to sign employment agreements, and request[ing] that former employees sign separation agreements containing non-disclosure provisions prohibiting them from disclosing company information, with no exception for law enforcement agencies or regulators.” This is the CFTC’s first enforcement of Regulation 165.19(b).

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Consumer Financial Protection Bureau Stands Up to Protect Whistleblowers from Overly Broad NDAs

by Benjamin Calitri

Benjamin Calitri

Photo courtesy of author

Protections for whistleblowers from overly expansive non-disclosure agreements (NDAs) aimed at preventing whistleblowers from providing information to law enforcement and regulators have been expanding exponentially in the past year. The Securities and Exchange Commission’s (SEC) enforcement of Rule 21F-17(a) has gained teeth by increasing the monetary sanctions for enforcement. The Commodity Futures Trading Commission (CFTC) took its first enforcement of Regulation 165.19(b) against Trafigura for the use of NDAs meant to silence whistleblowers. The latest agency to take action against overly expansive NDAs is the Consumer Financial Protection Bureau (CFPB), which has announced that their employee protection regulation applies to NDAs that seek to silence whistleblowers.

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SEC Continues to Elevate its Enforcement of Rule 21F-17(a)

by Benjamin Calitri

Photo of Author

Benjamin Calitri (photo courtesy of Kohn, Kohn, and Colapinto LLP)

In January 2024, the SEC announced an $18 million settlement with J.P Morgan Securities for violations of Rule 21F-17(a), demonstrating its increased enforcement of the whistleblower rule, which prohibits any person from “tak[ing] any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement.” This follows a $10 million enforcement against D.E. Shaw, showing the SEC’s new stance of Rule 21F-17(a): sanctions that are actually large enough to deter illegal NDAs.

The SEC Enforcement Order found that J.P. Morgan Securities (JPMS) typically requested certain clients sign a Release if they received a credit or settlement of over $1,000, regardless of whether JPMS admitted or denied any error or wrongdoing in connection with the credit or settlement.

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$10 Million Penalty Against D.E. Shaw a Major Step in SEC’s Enforcement of Rule 21F-17(a)

by Benjamin Calitri

Photo courtesy of author

Benjamin Calitri (Photo courtesy of Kohn, Kohn & Colapinto LLP

The SEC recently charged an investment advisor, D. E. Shaw, with Rule 21F-17(a) violations for including clauses in their employment and severance agreements that prohibited whistleblowing. For these violations, D.E. Shaw was fined $10 million. This is a significant development for enforcement of Rule 21F-17(a) as it is over twenty times larger than the previous highest penalty for a Rule 21F-17(a) violation.

It remains to be seen whether sanctions of this size are the new normal for Rule 21F-17(a) actions, but the D.E. Shaw case is undoubtedly a major development. The action dramatically changes the cost-benefit analysis for companies seeking to use contracts to silence whistleblowers and sends a clear message that the SEC is taking violations of Rule 21F-17(a) seriously.

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SEC Takes First Rule 21F-17(a) Action Against Private Company

by Benjamin Calitri

Benjamin Calitri. Photo courtesy of Kohn, Kohn & Colapinto, LLP.

On September 8th, the SEC announced its first enforcement action against a private company for violation of Rule 21F-17(a). Rule 21F-17(a) prohibits any person from “tak[ing] any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement.” In other words, this rule prevents companies from silencing whistleblowers.

The Commission already has a strong record of enforcing this rule among public companies, but its recent $225,000 sanction against Monolith Resources marks the first time the Commission has charged a privately held company, that is not a broker or investment advisor, for violating this rule.

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