The Securities and Exchange Commission (SEC) on Sept. 9 announced settled charges against seven public companies, including Oklahoma-based LSB Industries, for using employment, separation, and other agreements that violated rules prohibiting actions to impede whistleblowers from reporting potential misconduct to the SEC.
The companies agreed to pay more than $3 million combined in civil penalties to settle the SEC’s charges, with LSB agreeing to pay $156,000 related to 16 agreements between December 2019 and November 2023 that required employees to waive their right to recover a monetary award for participating in an investigation by a government agency.
Although these agreements expressly permitted participation in government whistleblower programs, the SEC said they also required employees to waive their right to a potential award. The SEC noted, however, that it is unaware of any instances in which LSB took action to enforce the award-waiver provisions.
“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,” said Jason J. Burt, Director of the SEC’s Denver Regional Office. “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.”
Other companies that agreed to pay penalties include Acadia Healthcare Company Inc., Brands Holding Corp., AppFolio Inc., IDEX Corp., Smart for Life Inc., and TransUnion. The SEC said each of the firms has agreed not to violate this rule in the future and has taken steps to remediate the violations, including making changes to the relevant agreements.