Regulatory and Enforcement Alert
SEC Settles Charges Against Investment Firm for Violating DoddFrank Whistleblower Protections
June 29, 2021

Key Takeaways•

The SEC’s enforcement of Rule 21F-17 reaffirms the SEC’s belief that whistleblowing is critical to its
enforcement program.

•Companies should ensure that they do not maintain internal policies that can be read to impede
whistleblowers.

The SEC recently announced that it settled administrative charges against an Investment Firm for violations ofExchange Act Rule 21F-17. 1 Rule 21F-17, which seeks to ensure the SEC’s unfettered access to whistleblowers,
specifically prohibits “tak[ing] any action to impede an individual from communicating directly with theCommission staff about a possible securities law violation, including enforcing, or threatening to enforce, aconfidentiality agreement . . . with respect to such communications.” The rule was adopted pursuant to authority
granted by the Dodd-Frank Act, and became effective in August 2011.
In its order, the SEC found that from at least April 2016 until July 2020, the Firm’s compliance manual included arequirement that employees obtain the approval of the Firm’s Legal or Compliance Department before initiating
contact with regulators, including the SEC. Although the policy did not expressly prohibit whistleblower
communications, and the SEC noted that it was not aware of any specific instances in which a Firm employee
actually refrained from communicating with the SEC about potential violations of the securities laws (or that theFirm ever took action to enforce the provision of the manual), the SEC nevertheless concluded that the languagein the manual undermined the purpose of Rule 21F-17.
Without admitting or denying the charges, the Firm agreed to a cease-and-desist order, censure, and payment of acivil penalty of $208,912. The SEC acknowledged that its settlement took into consideration the Firm’s prompt
remedial action and its cooperation with the SEC, including removing the offending language from the Firm’s

1 See In re Guggenheim Securities LLC, Release No. 92237, 2021 WL 2581714 (June 23, 2021).

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Regulatory and Enforcement Alert – June 29, 2021

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compliance manual and adding a provision that affirmatively advises employees of their right to communicate
with regulators if they are concerned about potential violations of laws or regulations.
The enforcement action against the Firm is the first brought under Rule 21F-17 since January 2017. The casedemonstrates the SEC’s renewed willingness to bring an enforcement action under Rule 21F-17, and affirms theSEC’s position that whistleblowers are an integral component of its enforcement program. Companies should
ensure that internal policies—written or otherwise—cannot be read or understood (even if not intended) toconstrain the ability of employees to communicate with regulators about possible securities law violations.

For further information about this Alert, please contact one of the following members of the Firm’s Litigation
Department.
NEW YORK CITY
Marc P. Berger+1-212-455-2197
marc.berger@stblaw.com

Brooke E. Cucinella+1-212-455-3070
brooke.cucinella@stblaw.com

Stephen M. Cutler+1-212-455-2773
stephen.cutler@stblaw.com

Nicholas S. Goldin+1-212-455-3685
ngoldin@stblaw.com

Michael J. Osnato, Jr.
+1-212-455-3252
michael.osnato@stblaw.com

Andrew Marrero+1-212-455-2276
andrew.marrero@stblaw.com

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