SEC Case Opens Door For Investor Whistleblowers

By Ira Kustin, John Nowak, Michael Spafford, Amanda Pober and Daren Stanaway (December 3, 2019, 1:26 PM EST) -- For the first time, the U.S. Securities and Exchange Commission recently applied Rule 21F-17 of the Securities Exchange Act of 1934 outside the context of the traditional employer-employee relationship.

Rule 21F-17 is a whistleblower protection that prohibits anyone from interfering with an individual's ability to communicate with the SEC about potential securities violations. Since Rule 21F-17's adoption in August 2011, the SEC has only enforced the rule in the context of an employer-employee relationship — that is, where an employer allegedly interfered with an employee's ability to speak with the SEC.

That enforcement approach ended earlier this month when the SEC...

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