On June 22, 2022, the SEC announced a settlement with The Brink's Company (Brinks) concerning alleged violations of Exchange Act Rule 21F-17. Rule 21F-17 prohibits any person from impeding an individual's communication with the SEC about a possible securities law violation, including by way of a confidentiality agreement. From 2015 to 2019, Brinks required new employees to sign confidentiality agreements (and certain other agreements) that prohibited employees from disclosing the company's confidential information to third parties without prior authorization and contained no exemption for would-be whistleblowers.
The SEC's order notes that in April 2015, the SEC brought its first enforcement action for violation of Rule 21F-17 based on a company's use of a restrictive confidentiality agreement. Thereafter, Brinks' legal departments received law firm client bulletins, alerts, and other notices regarding this and other, similar enforcement actions. Despite these notices, Brinks revised the confidentiality agreement to impose a $75,000 liquidated damages clause (plus attorney's fees and costs) on employees who violated the agreement. In 2017, Brinks added a whistleblower carve-out for executives in corporate-level severance agreements but provided no whistleblower exception in the confidentiality agreements until April 2019.
As part of its settlement with the SEC, Brinks agreed to add a provision in all employment-related agreements that clearly describes employees' rights to communicate or cooperate with government agencies without prior notice to or approval from Brinks. Brinks also agreed to inform current and former employees who had signed the confidentiality agreement of this change in policy. Brinks further agreed to cease and desist from further violations of Rule 21F-17 and pay a penalty of $400,000.
The SEC's order underscores the importance the SEC places on whistleblower protections for employees. It also serves as a helpful reminder for companies to ensure their policies align with the SEC's requirements under Rule 21F-17.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.