SEC Cracks Down on DraftKings and GQG Partners in Separate Enforcement Actions

The U.S. Securities and Exchange Commission (SEC) has doubled down on its commitment to market fairness and transparency, announcing two enforcement actions that hit both DraftKings Inc. and GQG Partners LLC with hefty penalties.

In the first action, the SEC announced that DraftKings Inc. has been fined $200,000 for violating Regulation Fair Disclosure (FD). The company’s CEO used personal social media accounts to selectively disclose material, nonpublic information regarding DraftKings’ growth to some investors, leaving the broader market in the dark.

On July 27, 2023, DraftKings’ CEO posted updates about the company’s “really strong growth” in several states where it was operational—prior to the public release of the company’s second-quarter financial results. These posts appeared on his X (formerly Twitter) and LinkedIn accounts, but the information was not disclosed to the public until seven days later.

The SEC’s Associate Director for Enforcement, John Dugan, emphasized the significance of even unintentional violations. “Information about growth in sales as a public company can be extremely important to investors. It is essential that, when companies disseminate material, nonpublic information, they do so fairly to all investors.”

Without admitting or denying the charges, DraftKings agreed to the penalty and to cease and desist from future violations, as well as to implement Regulation FD training for relevant employees.

GQG Partners Faces $500,000 Fine for Whistleblower Violations

Meanwhile, GQG Partners LLC was charged for entering into restrictive employment agreements that violated the SEC’s whistleblower protection rule. Between November 2020 and September 2023, the firm signed agreements with potential hires and a former employee that effectively impeded individuals from reporting securities law violations to the SEC.

The SEC’s investigation revealed that these agreements prohibited job candidates from voluntarily disclosing confidential information to the SEC without notifying GQG. Worse, the firm entered into a settlement with a former employee, which, while allowing for whistleblower reporting, simultaneously forced the individual to affirm that they had not done so and to withdraw any prior statements that might have supported an investigation.

“Firms cannot impose barriers to persons providing evidence about possible securities law violations to the SEC, as GQG did,” said Corey Schuster, Co-Chief of the SEC’s Asset Management Unit.

Without admitting or denying the findings, GQG agreed to a $500,000 civil penalty and compliance with whistleblower protection rules moving forward.

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