The Securities and Exchange Commission (SEC) recently announced settlements with two companies for using severance agreements that allegedly violated Rule 21F-17. [Order Instituting Cease-And-Desist Proceedings, In the Matter of BlueLinx Holdings, Inc., No. 3-17371 (SEC Aug. 10, 2016) (BlueLinx Order).] Rule 21F-17 provides that ‘‘[n]o person may take any action to impede an individual from communicating directly with the [SEC] staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement.’’ [17 C.F.R. § 240.21F-17(a).] The rule is part of the SEC’s whistleblower program, which provides significant monetary incentives to individuals in exchange for information regarding potential securities violations.

Originally published in Bloomberg BNA's Securities Regulation

& Law Report™ - September 19, 2016.