The Securities and Exchange Commission (the “SEC”) showed its teeth when it imposed its first “stand-alone” fine under the “Whistleblower Program” at the end of September, 2016. The Program was authorized by the Dodd-Frank Act. The fine against International Game Technology was for firing an employee who reported to senior management and the SEC that the company might have filed incorrect financials. Even though it turned out that he was wrong, he had a “good faith belief” that he was right. See SEC Press Release, here. An earlier case against Paradigm Capital Management, a hedge fund advisory firm, involved a number of securities violations, including retaliation against a whistleblowing employee. The case resulted in an agreement to pay $2.2 million to shareholders and in fines and interest. The case was settled in June, 2014. See SEC Press Release, here.
The SEC says that it has now awarded more that $100 million to eligible whistleblowers under its program, including $22 million to an ex-Monsanto employee in August, 2016. See SEC Press Release, here.
The SEC has also settled a case in August against BlueLinx Holdings Inc., an Atlanta-based building products distributor, accusing it of violating the whisteblower provision by requiring employees leaving the firm to sign a severance agreement waiving their rights to severance if they were to file a complaint with the SEC or other federal agencies. See SEC Press Release, here. The SEC settlement indicates that companies must ensure that their employment and severance agreements do not effectively force an employee to waive whistleblowing rights.