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SEC Imposes $340,000 Fine Because Severance Agreements Violated Dodd-Frank Act

whistleblower woman

The SEC fined a public company $340,000 because its voluntary severance agreements prohibited former employees from receiving a whistleblower award or other financial benefit for participating in a government investigation.  Although the severance agreements did not prohibit former employees from cooperating with, or providing information with respect to, a government investigation, the SEC asserts that the removal of the financial incentive violated the Dodd-Frank Act.  The SEC imposed the fine even though it was “unaware of any instances in which (i) a former employee of Respondent who executed the above noted agreements did not communicate directly with Commission staff about potential securities law violations or (ii) Respondent took action to enforce those provisions or otherwise prevent such communications.”

 

OUR TAKE: This is the second case this month against a company with violative severance agreements (See https://cipperman.com/2016/08/11/sec-imposes-265000-fine-because-severance-agreements-restricted-whistleblowers/).  It should be noted that the SEC can bring enforcement actions for technical violations even without a showing of actual harm or damages.

 

http://www.sec.gov/litigation/admin/2016/34-78590.pdf