Large Asset Manager Pays $340,000 Fine because Separation Agreements Violated Whistleblower Rule
The SEC fined a large asset manager $340,000 because it added provisions to its separation agreements prohibiting employees who received severance payments from collecting whistleblower awards. The SEC contends that the respondent added the provisions after the SEC adopted the Dodd-Frank rule prohibiting any action that could impede a potential whistleblower. The SEC imposed the fine even though the respondent voluntarily changed the language and even without any evidence that any employee was actually impeded or that the respondent ever sought to enforce the restrictions. An SEC official faulted the firm for taking “direct aim at our whistleblower program by using separation agreements that removed the financial incentives for reporting problems to the SEC.”
OUR TAKE: Registrants must immediately review and revise confidentiality and separation agreements to strike any potentially violative language.