The U.S. Securities and Exchange Commission (SEC) on September 8, settled charges against Monolith Resources LLC, a privately held technology and energy company based in Nebraska. The SEC’s enforcement action alleged that Monolith had violated the SEC Whistleblower Protection Rule 21F-17 by employing restrictive employee separation agreements.
The SEC Whistleblower Protection Rule 21F-17 is part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Its purpose is to prevent companies from using separation agreements to silence potential whistleblowers, which undermines the SEC’s ability to uncover and investigate potential violations.
As part of the settlement, Monolith Resources agreed, without admitting or denying the SEC’s findings, to revise its separation agreements to respect whistleblower protection regulations. Moreover, it consented to pay a penalty of $225,000. This penalty signifies an unwavering commitment from the SEC to enforce whistleblower protections strictly and maintain corporate transparency.
According to the SEC, Monolith employed language in its separation agreement that could potentially impede employees from reporting legal breaches to the SEC or any other governing body. Notably, such clauses are in direct violation of Rule 21F-17, which was instituted in 2011 and amended in 2015 to further restrict practices that could interfere with a potential whistleblower’s ability to communicate directly with the SEC regarding any possible securities law violation.
The case is illustrative of the seriousness with which the SEC treats infringements of whistleblower protections and should serve as a reminder to private and public companies alike to scrutinize their employment and separation agreements to ensure they comply with all relevant regulations, especially whistleblower protection laws.