How Hedge Fund Managers Can Balance Protecting Confidential Information Against Complying With Whistleblower Laws

Anne E. Beaumont and Lance Gotko
Hedge Fund Law Report
August 29, 2016

The Hedge Fund Law Report has published an article by Friedman Kaplan litigation partners Anne Beaumont and Lance Gotko discussing the recent SEC settlement with BlueLinx Holdings Inc. The settlement, which builds upon the principles articulated in the SEC's April 2015 settlement with KBR, Inc., relates to provisions the company had included in severance agreements. Those provisions restricted former employees’ abilities to disclose the company’s confidential information and to receive rewards as SEC whistleblowers. The BlueLinx and KBR consent orders together underscore the SEC’s view that any provisions that might stifle an employee’s communications with the SEC – either explicitly (as in KBR) or implicitly (as in BlueLinx) – are prohibited, regardless of the employer’s intent, its efforts (or lack thereof) to enforce them or their actual chilling effect.  These developments have implications not just for the hedge fund industry: they potentially affect any firm that is subject to SEC oversight.

Ms. Beaumont and Mr. Gotko review the applicable whistleblower rules and discuss the settlements, the industry reaction, and lessons for hedge funds and other employers. Please find the full text of the article at the link below.

View Document(s):