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SEC Whistleblower Investigation Leads to Concern Over Protecting Confidential Information

A recent article from the Wall Street Journal indicates that the Securities & Exchange Commission (SEC) began a formal inquiry into whether corporations are setting up their confidentiality agreements in ways that prevent their employees from reporting violations of securities law to the SEC. This article is just the most recent report of significant concerns about corporations trying to escape liability of violations, and it appears that the SEC is now ready to act on those concerns.

For example, in an investigation from 2014, the SEC reportedly looked into allegations of a defense contractor using confidentiality agreements to keep its employees from reporting alleged fraudulent activity to federal officials.

In its 2014 annual report, the SEC Office of the Whistleblower said that one of its goals was to identify confidentiality and severance agreements that could prevent an employee from reporting wrongdoing to the SEC. As part of that stated goal, the agency has sent letters requesting copies of nondisclosure and confidentiality agreements — as well as other, similar documents — to a number of businesses and organizations throughout the country. 

There have already been record numbers of whistleblowers providing information about wrongdoing within their companies under the new SEC whistleblower award program. If the agency is able to find which companies are violating rules about these confidentiality agreements and force them to remove language preventing employees from reporting wrongdoing, those numbers of whistleblowers could swell to even greater levels across all industries.

If your company or organization forbids you from reporting wrongdoing to the SEC, speak with the Dallas attorneys at Whistleblower Law for Managers for the legal advice you need.

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