SEC Fines Nebraska Company for Violating Whistleblower Safeguards
The Securities and Exchange Commission (SEC) recently imposed a $225,000 fine on Monolith Resources, a privately held energy and technology company based in Lincoln, Nebraska. The company allegedly required departing employees to sign separation agreements that waived their right to receive financial awards after filing successful whistleblower claims.
Monolith’s fine is a reminder that both privately held and publicly traded companies are obligated to uphold SEC-mandated protections for whistleblowers.
The SEC's investigation revealed that Monolith Resources obstructed its whistleblower program from February 2020 to March 2023 by including clauses in separation agreements that discouraged employees from reporting potential securities law violations to the SEC. Specifically, these agreements contained provisions stating that departing employees did not have the right to recover money damages or other individual legal or equitable relief awarded in the event of a government investigation.
The SEC has stated that they are currently unaware of any situations which Monolith’s restrictions had prevented a whistleblower from coming forward. However, both private and public companies must refrain from using separation agreements or taking actions that discourage employees from communicating with the SEC about possible violations of securities law. Monolith, in this case, neither admitted nor denied the SEC's findings.
The SEC's whistleblower program helps maintain financial transparency and integrity in the corporate world. Whistleblowers who come forward to report possible violations of securities laws and regulations often take great personal risk. To encourage this, the agency offers financial incentives to whistleblowers who provide original, timely and credible information leading to successful enforcement actions.
During fiscal year 2022, the SEC granted $229 million in whistleblower awards, marking the second-highest total for both categories. Since the inception of the program in 2011, the SEC has awarded over $1 billion in payouts.
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