In light of the SEC’s first enforcement action against a company for impeding whistleblower activity in violation of Rule 21F-17, employers may wish to consider clarifying in their agreements, policies and practices that involve confidentiality obligations that employees may provide truthful information to the SEC or other governmental agencies concerning potential violations of law.

Rule 21F-17, adopted pursuant to the Dodd-Frank Act, provides in relevant part:

(a) No person may take any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement … with respect to such communications.

KBR, a Houston-based global technology and engineering firm, had a practice of conducting internal investigations in response to complaints regarding potential illegal or unethical conduct, which included interviewing employees (including those who had lodged a complaint). KBR required witnesses in these internal investigations to sign a confidentiality statement that included the following language:

I understand that in order to protect the integrity of this review, I am prohibited from discussing any particulars regarding this interview and the subject matter discussed during the interview, without the prior authorization of the Law Department. I understand that the unauthorized disclosure of information may be grounds for disciplinary action up to and including termination of employment.

The SEC acknowledged that it was not aware of any employee in fact being prevented from communicating directly with SEC staff, or of KBR taking any action to enforce these confidentiality statements. Nevertheless, the SEC concluded that that the language in the confidentiality statement impeded communications with the SEC staff about potential securities violations by requiring permission from KBR’s legal department or face the prospect of discipline.
Continue Reading Carefully Draft NDAs to Avoid Whistleblower Concerns

CONTRIBUTED BY

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Andrew Ledbetter
andrew.ledbetter@dlapiper.com
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Sanjay Shirodkar
sanjay.shirodkar@dlapiper.com

The SEC recently issued new rules requiring various disclosures concerning “conflict minerals” that originate in the Democratic Republic of the Congo (DRC) or an adjoining country. 

After considering thousands of comments and conducting a public roundtable, the SEC adopted (by a narrow 3 – 2 vote) new rules and a new form relating to the use of conflict minerals.  The new rules apply to substantially all issuers that file reports under Section 13(a) or Section 15(d) of the Exchange Act and impose additional disclosure requirements on issuers that use conflict minerals in, or to produce, their products.  Because the rules apply broadly to public companies, they are also important for private companies with aspirations of becoming public.

The reporting requirements are based on a three-step analytic process, with each step building on the prior step.  Depending on the outcome of the three-step analytic process, an issuer may have to submit a report to the SEC that includes a description of the measures it took to exercise due diligence on the conflict mineral’s source and chain of custody. To facilitate the new disclosure required by the rules, the SEC has also adopted a new Form SD.Continue Reading SEC Conflict Minerals Rules Impact Many Public Companies

pic-asher.jpgCONTRIBUTED BY
Asher Bearman
asher.bearman@dlapiper.com

As a result of the new rules under the Investment Advisers Act of 1940, even fund managers that are exempt from registration will need to file annual reports with the SEC.  Exempt reporting advisers (“Exempted Advisers”), including fund managers that rely on either the venture capital fund exemption or the private fund adviser exemption, will be subject to SEC oversight as “exempt reporting advisers” and must complete and periodically update a portion of Form ADV, the same form used by registered advisers.  This filing obligation becomes mandatory for Exempted Advisers beginning in the first quarter of 2012.  Form ADV is being further amended to reflect other changes pursuant to the Dodd-Frank Act, but those other changes are technical changes applicable to registered investment advisers and are beyond the scope of this discussion, which focuses on Exempted Advisers.

An Exempted Adviser does not need to report any of this information to the SEC until March 30, 2012, but should plan to file their completed Form ADV (Parts 1 and 2) no later than February 14, 2012 to ensure compliance by the deadline (since it can take up to 45 days for initial applications to be approved).  Form ADV filings are made electronically with the SEC through the Investment Adviser Registration Depository.  Generally, these filings are made at least annually, within 90 days of the end of the adviser’s fiscal year, and more frequently in certain cases.  All information filed on Form ADV is publicly available.Continue Reading Reporting Requirements for Funds Exempted from Investment Advisers Act Registration