WASHINGTON, April 30 (Reuters) - The U.S. Securities and Exchange Commission is looking into whether some companies are trying to force employees to sign agreements to forgo receiving whistleblower awards from the government to be eligible for severance pay, SEC Chair Mary Jo White said Thursday.
Speaking at conference at Northwestern University’s School of Law, White stopped short of saying whether the agency was investigating the issue, but strongly implied that the SEC is not happy about these tactics.
“You can imagine our Enforcement Division’s view of those and similar provisions under our rules,” White said in prepared remarks.
White’s comments Thursday come after the SEC achieved several major milestones in its relatively new whistleblower awards program.
Created by the 2010 Dodd-Frank Wall Street reform law, the program lets the SEC dole out cash awards that range between 10 percent and 30 percent of the total sanctions collected in a matter.
To qualify, a tipster must provide original and vital information, and the enforcement action must result in a sanction of over $1 million.
The law also gave the SEC newfound powers to shield whistleblowers from retaliation by their employers, and SEC rules permit employees to report misconduct to the agency directly without getting permission from their employers or reporting it internally first.
The SEC has been focusing recently on cases in which companies have tried to force employees who discover possible misconduct to sign confidentiality agreements.
Earlier this month, the SEC sued KBR Inc for such a practice, marking the first whistleblower protection case tied to restrictive language in confidentiality agreements.
KBR settled the case and agreed to pay $134,000.
Earlier this week, the SEC also awarded $600,000 to a whistleblower at hedge fund Paradigm Capital Management who experienced retaliation from his employer and reported it to regulators.
Paradigm was sued by the SEC over the retaliation last June and agreed to pay $2.2 million to settle.
White, in her speech Thursday, defended the SEC’s interpretation of the whistleblower retaliation rules, after some in the legal community have questioned whether the agency has overreached.
White said the rules are clear, and that any agreement which forces employees to get pre-approval to report misconduct to the SEC creates a “chilling” effect.
She added, however, that there is no sweeping prohibition on the use of confidentiality agreements, and companies can still use them to protect attorney-client privilege, trade secrets and the like.
Reporting by Sarah N. Lynch; Editing by Lisa Shumaker