By Mengqi Sun
The Securities and Exchange Commission has continued its crackdown on companies over language in their employment and separation agreements that could discourage whistleblowers from coming forward.
On Monday, the SEC fined seven public companies -- in industries ranging from healthcare to software -- more than $3 million combined, alleging their employment, separation and other agreements contain confidentiality clauses that violated SEC whistleblower-protection rules, including requiring employees to waive their right to possible whistleblower monetary awards.
Among the companies, behavioral healthcare services provider Acadia Healthcare received the largest fine in Monday's settlement, agreeing to pay nearly $1.4 million in civil penalties. Software provider AppFolio followed, agreeing to pay $692,250 in civil fines, while fashion retailer a.k.a. Brands Holding said it would pay $399,750 and credit-reporting agency TransUnion, $312,000.
Also fined were LSB Industries, IDEX and Smart for Life.
The SEC said the seven firms agreed to comply with whistleblower-protection rules going forward and have taken steps to remediate the issues, including by making changes to their relevant agreements.
A spokesman for Acadia Healthcare said it "understands the importance of regulatory requirements and worked quickly to resolve this issue with the SEC."
A spokeswoman for TransUnion said the settlement "reflects the seriousness with which we take our commitment to regulatory compliance," adding that the firm is making voluntary changes to ensure employees and contractors better understand their rights and responsibilities.
Representatives for AppFolio and a.k.a. Brands didn't immediately respond to requests for comment.
Monday's settlements are part of a sweep by the SEC over the past few years into companies' use of confidentiality provisions and nondisclosure clauses in their various employment contracts. A watershed moment came last September, when the SEC fined hedge fund D.E. Shaw $10 million.
The SEC recently expanded the investigation into companies' use of confidentiality agreements with clients.
Last week, the SEC fined broker-dealer Nationwide Planning Associates and investment advisers NPA Asset Management and Blue Point Strategic Wealth Management a total $240,000 over their use of nondisclosure agreements that the regulator said impeded their customers from reporting violations.
The securities regulator said the three firms asked 11 retail clients to sign confidentiality agreements in order to receive compensation for losses in their investment accounts caused by the firms' alleged breaches of federal or state securities laws.
Write to Mengqi Sun at mengqi.sun@wsj.com
(END) Dow Jones Newswires
September 09, 2024 16:00 ET (20:00 GMT)
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