SEC Sanctions Privately Held Company for Violating Whistleblower Protection Rule


On September 8, the U.S. Securities and Exchange Commission (SEC) announced that it had settled charges with Monolith Resources LLC, a privately held energy and technology company, for using severance agreements that violated the agency’s whistleblower protection rules. While the SEC has charged a number of companies with usings illegally restrictive seperation agreements or non-disclosure agreements, this is the first time it has charged a privately held company in this regard.

The SEC alleges that from February 2020 to March 2023, Monolith had 22 former employees sign separation agreements which required signees “to waive their rights to monetary whistleblower awards in connection with filing claims with or participating in investigations by government agencies.” While the agreements explicitly claimed to not limit departing employees’ ability to communicate potential securities violations to authorities, the SEC determined that the agreements “raised impediments to participation in the SEC’s whistleblower program by having employees forego important financial incentives that are intended to encourage people to communicate directly with SEC staff about possible securities law violations.”

The SEC therefore found that Monolith violated Rule 21F-17 of the SEC Whistleblower Program which bans employers from impeding an individual from blowing the whistle to the SEC on potential securities violations. Monolith agreed to pay $225,000 and to take remedial actions, including “notifying former employees who had signed the improper separation agreements that the agreements do not in any way limit their ability to obtain financial awards in connection with providing information to government agencies.”

“Both private and public companies must understand that they cannot take actions or use separation agreements that in any way disincentivize employees from communicating with SEC staff about potential violations of the federal securities laws,” said Jason J. Burt, Regional Director of the SEC’s Denver Office. “Any attempt to stifle or discourage this type of communication undermines our regulatory oversight and will be dealt with appropriately.”

Further Reading:

SEC Charges Privately Held Monolith Resources for Using Separation Agreements that Violated Whistleblower Protection Rules

More SEC Whistleblower News


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