On April 1, 2015, the SEC issued its first-ever enforcement action against a company for using overly restrictive language in one of its confidentiality agreements in violation of SEC Rule 21F-17(a). We posted previously regarding the settlement order between the SEC and KBR, Inc. In that Order, KBR, Inc., agreed to include the following language in its confidentiality agreements:
“Nothing in this Confidentiality Statement prohibits me from reporting possible violations of federal law or regulation to any governmental agency or entity, including but not limited to the Department of Justice, the Securities and Exchange Commission, the Congress, and any agency Inspector General, or making other disclosures that are protected under the whistleblower provisions of federal law or regulation. I do not need the prior authorization of the Law Department to make any such reports or disclosures and I am not required to notify the company that I have made such reports or disclosures.”
In the following video clip from a recent webinar, I discuss this whistleblower carve-out language and whether it should be included in all confidentiality agreements: