Sept. 8, 2023 — The Securities and Exchange Commission (SEC) has announced settled charges against Monolith Resources LLC, a privately held energy and technology company headquartered in Lincoln, Nebraska. The charges stem from Monolith’s use of employee separation agreements that violated the SEC’s whistleblower protection rules.
Protection of Whistleblowers is one of the primary objectives of the SEC’s Whistleblower Program. While the identity of the tipper is confidential and made even more so when the tip is submitted by his or her attorney, firms do on occasion attempt to thwart a potential whistleblower in their employment agreements. In this case, the attempt cost the company a civil penalty of $225,000, a cease and desist order, and a requirement that the company notify employees who had signed the improper separation agreements that the agreements do not limit their ability to obtain financial awards in connection with providing information to government agencies.
Violation of Whistleblower Protection Rules
According to the SEC’s order, Monolith Resources used separation agreements from February 2020 to early March 2023, requiring certain departing employees to waive their rights to monetary whistleblower awards in connection with filing claims with or participating in investigations by government agencies.
Disincentivizing Whistleblower Participation
The SEC’s order found that these separation agreements raised impediments to participation in the SEC’s whistleblower program by discouraging employees from pursuing important financial incentives designed to encourage direct communication with SEC staff about possible securities law violations.
Monolith’s Settlement and Remedial Actions
Monolith Resources, without admitting or denying the SEC’s findings, consented to cease and desist from committing or causing violations of the SEC’s whistleblower protection rules. The company also agreed to pay a civil penalty of $225,000, taking into account its remedial actions, including notifying former employees who had signed the improper separation agreements that the agreements do not limit their ability to obtain financial awards in connection with providing information to government agencies.
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Mark Astarita is a nationally recognized securities attorney, who represents investors, financial professionals and firms in securities litigation, arbitration and regulatory matters, including SEC and FINRA investigations and enforcement proceedings.
He is a partner in the national securities law firm Sallah Astarita & Cox, LLC, and the founder of The Securities Law Home Page - SECLaw.com, which was one of the first legal topic sites on the Internet. It went online in 1995 and is updated daily with news, commentary and securities law related links.
