The SEC today announced a potentially game-changing enforcement action - "The Securities and Exchange Commission today announced its first ever enforcement action against a company for using improperly restrictive language in confidentiality agreements with the potential to stifle the whistleblowing process."

Prior to and especially since the passage of Dodd-Frank and the establishment of the SEC Whistleblower Program, companies have attempted to prevent whistleblowers from reporting securities fraud to the SEC.

These silencing measures are done in various ways - from clauses in employment agreements forcing employees to internally report (at their peril) to clauses requiring employees to forfeit any possible award under the SEC whistleblower program.

The SEC had pledged, quite forcefully, to investigate and take action against companies utilizing such gag clauses, given their obvious aim to undermine securities enforcement efforts.

This action marks a new chapter in SEC enforcement and is an important victory for whistleblowers. It should also serve as a shot across the bow to corporate counsel that drafting and using such language could make your company the next target.
— Shayne Stevenson