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7 public companies charged by SEC with violating whistleblower protection rule

On Behalf of | Oct 15, 2024 | Securities and Compliance

The Securities and Exchange Commission announced that it has charged seven public companies with violating its whistleblower protection rule.

In a news release, the SEC said the companies had settled the charges against them and agreed to pay a combined total of $7 million in civil penalties.  The commission found that the firms had been using employment, separation, and other agreements that violated rules prohibiting actions to impede whistleblowers from reporting potential misconduct to the SEC.

The list is as follows:

-Acadia Healthcare Company, Inc., agreed to pay a $1,386,000 civil penalty;
-a.k.a. Brands Holding Corp. agreed to pay a $399,750 civil penalty;
-AppFolio, Inc., agreed to pay a $692,250 civil penalty;
-IDEX Corporation agreed to pay a $75,000 civil penalty;
-LSB Industries agreed to pay a $156,000 civil penalty;
-Smart for Life, Inc. agreed to pay a $19,500 civil penalty; and
-TransUnion agreed to pay a $312,000 civil penalty.

“The SEC’s whistleblower program strengthens market integrity by providing protection and incentives for those who come forward and report potential violations of the securities laws,” said Jason J. Burt, Director of the SEC’s Denver Regional Office. “According to the SEC’s orders, among other things, these companies required employees to waive their right to possible whistleblower monetary awards. This severely impedes would-be whistleblowers from reporting potential securities law violations to the SEC.”

“Ensuring that potential whistleblowers can communicate directly with the Commission is a critical part of the SEC’s oversight mandate,” said Creola Kelly, Chief of the SEC’s Office of the Whistleblower.

The firms were each charged with violating whistleblower protection Rule 21F-17(a), which prohibits any action to impede an individual from communicating directly with the SEC staff about a possible violation of securities laws. According to the SEC, each of the seven firms has agreed not to violate this rule in the future and has taken steps to remediate the violations they were charged with, including making changes to the relevant agreements.

The attorneys at Lewitas Hyman include former senior attorneys at the SEC whose legal experience and industry knowledge make them uniquely qualified to provide counsel on securities regulatory, compliance and enforcement matters. Our attorneys fully understand the regulatory scrutiny financial professionals and their firms face from the various regulators that oversee the financial services industry. If your firm is facing an investigation from a regulatory agency, please contact Lewitas Hyman at (888) 655-6002 or through our online contact form.

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