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SEC Cites Brokerage Firm for Violating Whistleblower Protection Rule

On September 29th, 2023, the Securities and Exchange Commission (SEC) announced that a brokerage-firm has been cited for violating federal whistleblower protection regulations. D.E. Shaw & Co., L.P.— a brokerage firm headquartered in New York City—reportedly required its employees to sign contracts that prohibited them from making protected disclosures to the SEC. Here, our Miami SEC whistleblower attorney highlights the key things to know about this case and the law.

SEC Enforcement Action Whistleblower Protection Violation By Registered Broker-Dealer 

The SEC recently announced that the federal agency has settled whistleblower protection violations charges with the New York-based investment advisory firm D. E. Shaw & Co., L.P. As part of the settlement agreement, the broker-dealer will pay $10 million.

Federal officials emphasize that D. E. Shaw & Co., L.P.  mandate that its new hires sign on-disclosure agreements without exceptions for SEC whistleblowing between 2011 and 2019. Beyond that, hundreds of departing employees also signed violative severance agreements.

The agreements in question effectively barred employees from disclosing any protection information to the SEC. Federal law—including the regulations of the SEC whistleblower program—explicitly prohibit the use of these types of agreements in the securities industry.

 What is the SEC Whistleblower Program? 

The SEC Whistleblower Program is a federal program that is designed to incentivize people in the securities industry to report potential violations of federal securities law. Under the terms of the  program, eligible whistleblowers—defined as those who voluntarily provide original, timely, and credible information that leads to a successful enforcement action—may receive monetary awards.

An Overview of SEC Whistleblower Awards

How much whistleblower compensation can a person get through an SEC whistleblower action? The answer depends on the nature and scope of the underlying violation. As a general rule, SEC whistleblower awards can range between 10 percent to 30 percent of the money collected—as long as the total monetary sanctions exceed $1 million. Within that range, the SEC has some discretion. The agency will generally approve larger awards (closer to 30 percent) if the whistleblower’s original information is especially vital to taking enforcement action.

Note: You do not have to be an employee of a broker-dealer to seek an SEC whistleblower award.

Federal Law Provides Whistleblower Protection to Securities Industry Whistleblowers 

Beyond the ability to file for SEC whistleblower compensation, whistleblowers are entitled to some key legal protections. The SEC whistleblower program offers confidentiality protections. The agency never publicly identifies whistleblowers—even when an award is issued. Further, registered broker-dealers are strictly prohibited from taking adverse personnel action against a whistleblower.

Contact Our SEC Whistleblower Claim Lawyer Today

At ​Carlson & Associates, P.A., our law firm has the professional knowledge and legal experience to help securities industry whistleblowers navigate SEC regulations. Are you considering making a protected disclosure? You may be entitled to a whistleblower award through the SEC’s whistleblower program. Contact us now to get immediate help from an experienced SEC whistleblower lawyer. From our Miami office, we handle SEC whistleblower cases in Florida and throughout the region.



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