Confidentiality Agreements that Impede SEC investigations and whistleblowers found illegal

The Securities and Exchange Commission charged a Houston-based technology and engineering firm KBR Inc. with violation of an SEC whistleblower protection rule, its first-ever action against a company for impeding the whistleblowing process. KBR required witnesses in certain internal investigations to sign confidentiality statements with language warning they could face discipline, including termination, if they discussed the matters with outside parties without the prior company approval. The investtigations included allegations of possible securities law violations, and  the SEC found KBR’s terms violated Rule 21F-17. The rule, enacted under the Dodd-Frank Act, prohibits companies from taking any action to impede whistleblowers from reporting possible securities violations to the SEC. KBR agreed to pay a $130,000 penalty to settle the SEC’s charges. The company also amended the language of its confidentiality statement.