SEC Charges Seven Public Companies with Violations of Whistleblower Protection Rule

The Securities and Exchange Commission today announced 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 SEC. To settle the SEC’s charges, the companies agreed to pay more than $3 million combined in civil penalties.

• Acadia Healthcare Company, Inc., agreed to pay a $1,386,000 civil penalty;
• a.k.a. Brands Holding Corp. agreed to pay a $399,750 civil penalty;
• AppFolio, Inc., agreed to pay a $692,250 civil penalty;
• IDEX Corporation agreed to pay a $75,000 civil penalty;
• LSB Industries agreed to pay a $156,000 civil penalty;
• Smart for Life, Inc. agreed to pay a $19,500 civil penalty; and
• TransUnion agreed to pay a $312,000 civil penalty.

“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.”

“Ensuring that potential whistleblowers can communicate directly with the Commission is a critical part of the SEC’s oversight mandate,” said Creola Kelly, Chief of the SEC’s Office of the Whistleblower.

The 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. 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.

The SEC’s investigation, which is ongoing, is being conducted by Eric Day of the Denver Regional Office with assistance from Helena Engelhart Bean and the staff of the SEC’s Office of the Whistleblower, including Kelly Breakey and Elizabeth McMurray, and is supervised by Danielle R. Voorhees, Nicholas P. Heinke, and Mr. Burt, also of the Denver Regional Office.