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April 8, 2015

Stroock Special Bulletin

By: Elizabeth E. DiMichele, Howard S. Lavin

The Securities and Exchange Commission (the “SEC”) announced on April 1, 2015, that it had settled the first enforcement action it brought against a company for using language in an agreement that could “stifle the whistleblowing process” created by the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”).  Among other things, Dodd-Frank includes anti-retaliation provisions, financial incentives and confidentiality provisions to encourage whistleblowers to report potential securities law violations.  Multiple factors suggest that the SEC may bring additional enforcement actions pursuant to Rule 21F-17 of the Securities Exchange Act of 1934 (the “Exchange Act”).
This Stroock Special Bulletin discusses the settlement, which arose out of a cease-and-desist proceeding filed by the SEC with respect to a confidentiality statement maintained by KBR, Inc. (“KBR”) in connection with its internal investigation of complaints, including allegations of potential federal securities violations.