Washington D.C., Dec. 19, 2016 —The Securities and Exchange Commission today announced that a technology company has agreed to pay a penalty of $180,000 to settle charges involving its severance agreements that impeded at least one former employee from communicating information to the SEC.
The SEC’s order finds that Virginia-based NeuStar Inc. violated a whistleblower protection rule in the federal securities laws by routinely entering into severance agreements that contained a broad non-disparagement clause forbidding former employees from engaging with the SEC and other regulators “in any communication that disparages, denigrates, maligns or impugns” the company. Former employees could be compelled to forfeit all but $100 of their severance pay for breaching the clause. These severance agreements were used with at least 246 departing employees from Aug. 12, 2011 to May 21, 2015.
NeuStar, which voluntarily revised its severance agreements promptly after the SEC began investigating, consented to the SEC’s cease-and-desist order without admitting or denying the findings. The company agreed to make reasonable efforts to inform those who signed the severance agreements that NeuStar does not prohibit former employees from communicating any concerns about potential violations of law or regulation to the SEC.
“Public companies cannot use severance agreements to impede whistleblowers from communicating with the SEC about a possible securities law violation,” said Antonia Chion, Associate Director of the SEC’s Enforcement Division. “NeuStar’s severance agreements broadly prohibited former employees from communicating any disparaging information about the company to the SEC, and unsurprisingly at least one former NeuStar employee was chilled by such language.”
Jane Norberg, Chief of the SEC’s Office of the Whistleblower, added, “This action demonstrates our continued strong enforcement of this critically important whistleblower protection rule and underscores our ongoing commitment to ensuring that potential whistleblowers can freely communicate with the SEC about possible securities law violations.”
The SEC’s investigation was conducted by Paul J. Bohr and supervised by Ricky Sachar and Ms. Chion.