SEC Announces Review of Financial Firms’ Employment Documentation Concerning Whistleblower Rights: Review Has Implications for All U.S. Public Companies; Registered Investment Advisers and Broker-Dealers Should Consider Reviewing Their Employment Documents Now

Sullivan & Cromwell LLP - November 1, 2016

On October 24, 2016, the Office of Compliance Inspections and Examinations (“OCIE”) of the Securities and Exchange Commission issued a Risk Alert notifying registered investment advisers and broker-dealers that OCIE staff intends to review those entities’ compliance with the rules implementing the Dodd-Frank Act’s whistleblower provisions.  The reviews will include an assessment of whether employment documents—such as employment offer letters, handbooks and severance agreements—adequately inform employees of their rights to make whistleblower disclosures despite confidentiality and other provisions limiting employees’ disclosure of the employers’ information.  The Risk Alert states that the OCIE may report potential violations to the SEC’s Division of Enforcement.  Although the OCIE review is specific to registered investment advisers and broker-dealers, the Dodd-Frank whistleblower provisions relate to all public companies and the OCIE review is only one facet of the SEC’s continued focus on workplace policies that it considers undermine the purpose of these provisions.