BlackRock Pays SEC Penalty For Silencing Whistleblowers With Employee Agreements

SEC Office of the Whistleblower wikipedia image 342x210 BlackRock Pays SEC Penalty For Silencing Whistleblowers With Employee AgreementsAsset management corporation BlackRock Inc. has agreed to pay a $340,000 penalty to settle allegations that it improperly used separation agreements to muzzle exiting employees, forcing them to forfeit their whistleblower rights and protections, the U.S. Securities and Exchange Commission (SEC) said Tuesday.

The settlement makes BlackRock the latest in a series of companies that have settled similar allegations with the SEC’s Office of the Whistleblower in recent months, ending the practice of silencing would-be whistleblowers by threatening separation agreement arrangements and severance payments.

According to the SEC’s order, more than a thousand departing BlackRock employees signed separation agreements containing language stating that they “waive any right to recovery of incentives for reporting of misconduct” in order to receive their separation payments from the firm.

BlackRock added the unlawful waiver provision in October 2011 after the SEC adopted its whistleblower program rules, and the company continued using it in separation agreements until March 2016.

“BlackRock took direct aim at our whistleblower program by using separation agreements that removed the financial incentives for reporting problems to the SEC,” said Anthony S. Kelly, Co-Chief of the SEC Enforcement Division’s Asset Management Unit.  “Asset managers simply cannot place restrictions on the ability of whistleblowers to accept financial awards for providing valuable information to the SEC.”

BlackRock consented to the SEC’s order without admitting or denying the findings that it violated SEC rules. The order notes that BlackRock voluntarily revised its separation agreement and took a number of remedial actions, including better training in employee rights under the SEC’s whistleblower program.

The SEC took aim at companies attempting to undermine its whistleblower program with a blitz of investigative efforts, which have resulted in a multitude of settlements. Companies that have paid penalties and agreed to end their practice of impeding potential whistleblowers include Anheuser-Busch InBevBlueLinx Holdings Inc.Health Net Inc.NeuStar Inc., and SandRidge Energy Inc.

U.S. Securities and Exchange Commission
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