Eight Democratic members of the House Committees on Financial Services and Oversight and Government Reform recently sent a letter to Securities and Exchange Commission (“SEC”) Chairwoman Mary Jo White setting forth their concerns regarding “corporate practices [that] may deter whistleblowers from reporting violations of the securities laws, thereby threatening the effectiveness of the SEC’s Whistleblower Program.” Specifically, the lawmakers expressed alarm that employer-employee confidentiality agreements could undermine an SEC whistleblower’s right to report employer misconduct. The lawmakers further noted their concern about a “growing body of anecdotal evidence describing retaliation through litigation and on-the-job harassment, which if left unaddressed, will also deter future reporting of securities violations.”
The lawmakers’ concerns echoed those of Katz, Marshall & Banks partners Debra S. Katz and David J. Marshall, which they detailed in a letter to the SEC in May 2013. Ms. Katz and Mr. Marshall called on the SEC to “enact regulations to put an end to efforts by corporations to impose contractual limitations on the ability of whistleblowers ability to submit information to the SEC.” That letter focused on confidentiality language commonly found in separation agreements and described the potential for such language to have a chilling effect on individuals who might otherwise provide information to the SEC about potential securities violations. It remains to be seen whether the SEC will take additional regulatory action to address the concerns of lawmakers and protect individuals who could provide the SEC with important information about securities violations.