Public Companies Penalized for Blocking Whistleblowers from Reporting to SEC

In a sweeping enforcement action, the Securities and Exchange Commission has cracked down on several major public companies for impeding whistleblowers from reporting potential misconduct to regulators.

The SEC announced settlements totaling over $3 million with seven firms - including Acadia Healthcare, a.k.a. Brands, AppFolio, IDEX, LSB Industries, Smart for Life, and TransUnion. The companies were charged with violating whistleblower protection rules by using employment contracts and other agreements that discouraged employees from reporting securities law violations.

"These companies tried to shut down the flow of information to our watchdogs," said Creola Kelly, the SEC's Whistleblower Chief. "That's completely unacceptable and undermines the integrity of our markets."

The SEC found that the firms required workers to waive their rights to collect whistleblower awards, a practice that agency investigators say "severely impedes" would-be tipsters from coming forward.

Jason Burt, Director of the SEC's Denver office, warned that the crackdown sends a clear message: "Interfering with whistleblowers will not be tolerated."

Each company has agreed to pay civil penalties and revise their policies to comply with SEC whistleblower protection rules going forward. But the agency's investigation is ongoing, suggesting more enforcement actions could be on the horizon.

The SEC's investigation into these matters is ongoing.

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