by Tami Stark, Maia Gez, Scott Levi, and Tal Marnin
From left to right: Tami Stark, Maia Gez, Scott Levi, and Tal Marnin (Photos courtesy of Covington & Burling LLP)
On February 3, 2023, the US Securities and Exchange Commission (“SEC”) announced that a public company agreed to pay $35 million to settle charges of, among other things, violations of the whistleblower protection rule.[1] Securities Exchange Act of 1934 Rule 21F-17(a) prohibits any person from taking “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 . . . with respect to such communications.”
Since the Dodd-Frank Act provided the Commission with the power to bring actions against persons, including companies, for impeding reports to the SEC, the SEC has brought over 16 enforcement actions for violations of the whistleblower protection rule.[2] As this is the second time in a little over six months that the SEC has brought such an action, it appears to be a continuing area of focus for enforcement.