SEC Fines Seven Companies with whistleblower Violations
Date:
September 12, 2024
Overview:
The U.S. Securities and Exchange Commission (SEC) has announced settlements with seven public companies over charges of violating whistleblower protection rules. These companies have agreed to pay a combined total of more than $3 million in civil penalties. The SEC’s actions underscore the importance of protecting whistleblowers who report potential misconduct and also ensuring that companies adhere to regulatory requirements.
Details of the Violations:
The SEC’s investigation revealed that the companies involved had used employment, separation, and other agreements that violated Rule 21F-17(a) of the Securities Exchange Act. This rule prohibits any action to impede an individual from communicating directly with the SEC staff about a possible securities law violation. Among other things, these companies also required employees to waive their right to potential whistleblower monetary awards, which severely impedes would-be whistleblowers from reporting potential securities law violations to the SEC12.
Companies and Penalties:
The companies involved and their respective penalties are as follows:
- Acadia Healthcare Company, Inc.: $1,386,000
- a.k.a. Brands Holding Corp.: $399,750
- Also AppFolio, Inc.: $692,250
- IDEX Corporation: $75,000
- LSB Industries: $156,000
- Also Smart for Life, Inc.: $19,500
- TransUnion: $312,00012.
Statements from the SEC:
Jason J. Burt, Director of the SEC’s Denver Regional Office, also emphasized the importance of the whistleblower program in strengthening market integrity. “The SEC’s whistleblower program strengthens market integrity by providing protection and incentives for those who come forward and also report potential violations of the securities laws,” Burt stated1.
Creola Kelly, Chief of the SEC’s Office of the Whistleblower, also highlighted the critical role of whistleblowers in the SEC’s oversight mandate. “Ensuring that potential whistleblowers can communicate directly with the Commission is a critical part of the SEC’s oversight mandate,” Kelly said1.
Company Responses:
TransUnion, one of the companies fined, stated that it is already incorporating changes to better protect employees. “This settlement reflects the seriousness with which we take our commitment to regulatory compliance,” TransUnion said in an email. “We voluntarily assisted with the SEC’s work and are likewise making voluntary changes to ensure employees and contractors better understand their rights and also responsibilities, as set forth in the agreement”2.
Impact and Implications:
The SEC’s enforcement actions send a strong message to public companies about the importance of adhering to whistleblower protection rules. These settlements highlight the SEC’s commitment to ensuring that whistleblowers can also report potential misconduct without fear of retaliation or impediment. The fines and required changes to company policies aim to foster a more transparent and also accountable corporate environment.
