D.E. Shaw & Co. Fined for Violating Whistleblower Protection Rules

The U.S. Securities and Exchange Commission (SEC) recently imposed a fine on D.E. Shaw & Co. for allegedly breaching whistleblower protection rules through their employee disclosure agreements. To settle the matter, D.E. Shaw has agreed to pay a significant penalty of $10 million.

Interestingly, even after sending out an email in 2017 stating that employees were not restricted from reporting potential legal violations to regulators and that they did not require approval from D.E. Shaw for such communications, the company failed to update its agreements to incorporate SEC whistleblower protections until 2019.

The SEC also discovered that from 2011 to this year, approximately 400 departing employees were required to sign releases confirming that they had not filed any complaints with government agencies in order to receive deferred compensation and other valuable benefits, often amounting to millions of dollars. It was only after the regulatory investigation began that the language in these releases was modified.

The ramifications of this case highlight the importance of whistleblower protection and the need for companies to establish comprehensive policies that align with regulatory requirements. It serves as a reminder that businesses must actively foster an environment where employees feel safe and encouraged to report potential violations of the law.