SEC Fines Seven Companies With Whistleblower Violation

The U.S. Securities and Exchange Commission announced that it has settled charges against seven public companies for using employment, separation, and other agreements that violated rules prohibiting actions to impede whistleblowers from reporting potential misconduct to the regulator.

The companies agreed to pay more than $3 million combined in civil penalties to settle the SEC’s charges.

The impacted companies include Acadia Healthcare Company, Inc., a.k.a. Brands Holding Corp., AppFolio, Inc., IDEX Corp., LSB Industries Inc., Smart for Life, Inc., and TransUnion.

In the settlement with the SEC, Acadia Healthcare, a provider of behavioral healthcare services, agreed to pay a $1.39 million civil penalty, while a.k.a. Brands Holding Corp. agreed to pay $399,750.

The fine for AppFolio is $692,250, for IDEX is $75,000, and for LSB Industries is $156,000.

Further, Smart for Life agreed to pay $19,500 and Consumer credit reporting agency TransUnion agreed to pay a $312,000.

These firms were each charged with violating whistleblower protection Rule 21F-17(a), which prohibits any action to impede an individual from communicating directly with the SEC staff about a possible securities law violation.

The SEC’s investigation is ongoing, and the impacted firms have agreed not to violate this rule in the future and has taken steps to remediate the violations, including making changes to the relevant agreements.

Jason Burt, Director of the SEC’s Denver Regional Office, said, “The SEC’s whistleblower program strengthens market integrity by providing protection and incentives for those who come forward and report potential violations of the securities laws. According to the SEC’s orders, among other things, these companies required employees to waive their right to possible whistleblower monetary awards. This severely impedes would-be whistleblowers from reporting potential securities law violations to the SEC.”