On September 4, the SEC
announced it had settled
charges against three affiliated registrants (the respondents) accused of violating the whistleblower protection rule. According to the SEC order, from May 2021 through February 2024, the respondents required collectively eleven retail clients to sign confidentiality agreements that hindered them from reporting potential securities law violations to the SEC. Specifically, some agreements included provisions that restricted clients from disclosing information unless an inquiry was initiated by a regulator and required clients to represent that they had not reported and would not report the underlying dispute to any securities regulator.
The SEC found that respondents willfully violated Rule 21F-17(a) under the Securities Exchange Act, which prohibits taking any action to impede an individual from communicating with the SEC about possible securities law violations. The respondents agreed to the settlement without admitting or denying the findings.
Respondents are ordered to cease and desist from future violations of the whistleblower protection rule and are required to pay civil monetary penalties: the Commission-registered investment adviser will pay $160,000, the Commission-registered broker-dealer will pay $70,000, and the state-registered investment adviser will pay $10,000. The SEC noted that it considered the respondents’ cooperation and remedial efforts in determining the penalties and that penalties were apportioned based on the relative size and financial condition of the entities involved.
