SEC fines company for obstructive whistleblower policy

People in Wisconsin may be interested to learn about a recent announcement made by the Securities and Exchange Commission about the results of its first enforcement action the agency filed against a Houston-based company. The publicly traded company was fined for its policies and confidentiality agreements that could have potentially prevented whistleblowers from reporting securities violations to federal authorities.

In the agreement, KBR, Inc. will pay a fine of $130,000 and comply with a cease-and-desist order regarding the confidentiality agreements it required of its employees. The agreements provided that employees could not make reports without first getting approval from the company’s legal department.

The Dodd-Frank Act included an amendment to the Exchange Act in order to provide a compensation system for employees who came forward with reports of securities violations. The confidentiality agreements KBR, Inc. required of its employees pre-dated passage of the act. The SEC indicated there was no evidence that the company had actually used the agreements to prevent an employee from coming forward. However, the SEC wanted to send a clear message that such agreements are prohibited in and of themselves by Dodd-Frank. KBR, Inc. sent a company-wide message informing all employees that the confidentiality agreements that had been signed in no way would prevent them from reporting violations and that employees who did so would not first need to get approval from the legal department.

The SEC provides whistleblower protection, which encourages employees to come forward while also prohibiting employers from subsequent retaliation for doing so. In the event an employee has reported violations and then has subsequently suffered retaliation, they may want to seek the help of an employment law attorney. An attorney may be able to help with filing civil lawsuits under the federal and state whistleblower protection laws.

Source: Forbes, “SEC Sends A Message About Whistleblower Treatment,” Brett Joshpe, April 2, 2015

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