Public and Private Companies Beware – Don’t 21(F)umble Your Employment and Separation Agreements


SEC Charges CBRE, Inc. and D.E. Shaw & Co., L.P, with Violating Rule 21F-17(a) under the Securities Exchange Act of 1934

On September 19, 2023, the Securities and Exchange Commission (the “Commission”) announced that it had settled charges against CBRE, Inc. (“CBRE”), a Dallas-based commercial real estate services and investment firm and subsidiary of CBRE Group, Inc. (NYSE: CBRE), for including language in its separation agreements with employees that violated Rule 21F-17(a) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Commission subsequently announced on September 29, 2023 that it settled charges against a New York-based registered investment adviser, D. E. Shaw & Co., L.P. (“D.E. Shaw”), for, among other things, requiring new employees to sign agreements with a broad confidentiality provision that violated Rule 21F-17(a) and including a non-compliant representation in certain releases signed by departing employees. The announcements come on the heels of a settlement with Monolith Resources LLC, a privately held energy and technology company headquartered in Nebraska, over similar charges earlier this month, and they affirm the Commission’s continued focus on whistleblower protections. Most importantly, the settlements indicate that the Commission is applying Rule 21F-17 in an increasingly aggressive manner. It consequently may be prudent for companies (whether public or private) to review their Codes of Conduct, employee handbooks, employment agreements, separation agreements, confidentiality agreements, and similar documents once more.


The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) amended the Exchange Act by adding Section 21F, “Securities Whistleblower Incentives and Protection.” The purpose of this statute was to encourage whistleblowers to report possible violations of the securities laws by providing financial incentives, prohibiting employment related retaliation, and providing various confidentiality protections. The Commission adopted Rule 21F-17 in 2011 pursuant to this statute.  Since 2015, the Commission has actively enforced the rule, which provides in relevant part that “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.” The Commission’s focus has primarily been on provisions in employment agreements, separation agreements, confidentiality agreements, and similar documents that potentially prevent or discourage employees from reporting actual or potential legal violations to the staff of the Commission (the “Staff”). Notably, in many such enforcement actions, the Commission was not aware of specific instances in which an employee was prevented by the provisions at issue from communicating with the Staff about potential violations of securities laws, or in which the relevant entities took action against individuals based upon the provisions. Rather, the Commission asserted that the existence of the provisions themselves were actionable under Rule 21F-17 “due to the potential chilling effect on whistleblowers' willingness to report illegal conduct to the [Commission].”[i]

The Commission has now brought a total of 21 actions against companies and individuals for violating Rule 21F-17, including the enforcement actions against CBRE and D.E. Shaw discussed herein and five other such enforcement actions since the beginning of 2022.[ii] These recent enforcement actions reflect the Commission’s increasingly expansive stance with respect to what actions or agreement provisions might have a potential chilling effect on whistleblowers and arguably push the application of Rule 21F-17 beyond companies’ prior understanding of the rule.

CBRE Settlement

According to the cease-and-desist order against CBRE, between 2011 and 2022, CBRE required its outgoing employees to sign a separation agreement as a condition of receiving severance pay. The separation agreement contained the following representation (the “CBRE Representation”):

“Employee represents and acknowledges [t]hat Employee has not filed any complaint or charges against CBRE, or any of its respective subsidiaries, affiliates, divisions, predecessors, successors, officers, directors, shareholders, employees, representatives or agents (hereinafter collectively “Agents”), with any state or federal court or local, state or federal agency, based on the events occurring prior to the date on which this Agreement is executed by Employee.”

In addition, the separation agreement’s introductory paragraph stipulated that “Employee may not execute this Agreement prior to the Date of Termination.” The Commission asserted that, read together, the sentence in the introductory paragraph and the CBRE Representation required, in effect, that the employee represent that at the time of executing the agreement, the employee had not filed a complaint or charges based on either (i) events occurring at any time before termination, i.e., events spanning the employee’s entire employment with CBRE, or (ii) events occurring between termination and the employee’s execution of the agreement. In short, the Commission found that, by requiring the CBRE Representation, CBRE took action to impede potential whistleblowers from reporting complaints to the Commission.

The Commission further emphasized that the inclusion of the following “cure” provision did not remedy the chilling effect of the CBRE Representation because it was prospective in application:

“Nothing in this Agreement shall be construed to prohibit Employee from filing a charge with or participating in any investigation or proceeding conducted by the Equal Employment Opportunity Commission, National Labor Relations Board, the Securities and Exchange Commission, the Department of Justice, or a comparable federal, state or local agency.”

Once CBRE learned of the Commission’s investigation, it implemented a remediation program, including revisions to standard form agreements and policies, training and communications with former employees who had signed the form of agreement about their ability to communicate with the Staff.  As a result of CBRE’s cooperation and extensive remedial action, the Commission accepted CBRE’s settlement offer to pay a civil money penalty in the amount of only $375,000.

D.E. Shaw Settlement

The Commission also entered into a settlement agreement on September 29, 2023 with D.E. Shaw that included a much larger civil monetary penalty of $10 million. According to the Commission’s cease-and-desist order, from at least 2011 through 2019, D. E. Shaw required new employees to sign agreements that prohibited them from disclosing confidential information to anyone outside the company unless authorized by D. E. Shaw or required by law or court order, without any exception for voluntary communications with the Commission concerning possible securities laws violations. Confidential information was broadly defined to include, among other things, any information gained in the course of employment that could reasonably be expected to be deleterious to D. E. Shaw if disclosed to third parties.

In addition, according to the Commission’s cease-and-desist order, from at least 2011 through 2023, D. E. Shaw required approximately 400 of its departing employees to sign releases that included language affirming that the employees had not filed any complaints with any governmental agency, department, or official in order for them to receive deferred compensation and other benefits that were sometimes worth millions of dollars. Specifically, the departing employees were obligated to make the following representation (the “D.E. Shaw Representation”):

“The Employee represents and warrants to the Company that the Employee has not made, filed or lodged any complaints, charges, or lawsuits or otherwise directly or indirectly commenced any proceeding against any member of the D. E. Shaw Group and/or any Covered Persons and Entities with any governmental agency, department, or official; any regulatory authority; or any court, other tribunal, or other dispute resolution body.”

Certain of the releases further (i) made it clear that the non-compliant confidentiality provisions in the employment agreements remained in full force and effect and/or (ii) reiterated to employees that “you agreed that during the term of your employment and at any time thereafter, you would not use or cause to be used any Confidential Information of the D. E. Shaw Group except in connection with the business of the D. E. Shaw Group, and that you would not disclose any Confidential Information to any third parties, unless such disclosure has been authorized in writing by the Company.”

The Commission found that the overall result of the above-described clauses was to (i) raise impediments to D.E. Shaw employees from engaging in whistleblowing activity upon onboarding until D.E. Shaw revised its employment agreement in 2019, (ii) remind certain departing employees of D.E. Shaw’s prohibition on unauthorized disclosure of confidential information upon departure until June 2023, and (iii) condition payout of significant profit-sharing amounts or amounts of additional compensation on certain departing employees signing releases that, until June 2023, included an attestation that they had not filed any complaints with any governmental agency. The Commission also noted in its cease-and-desist order that it was aware of one former D.E. Shaw employee who was initially discouraged from communicating with the Staff regarding potential violations of securities laws as a result of such provisions.

While D. E. Shaw circulated a firm-wide email in 2017 notifying employees that they were not prohibited from communicating with regulators regarding possible violations of law and that notice to D. E. Shaw was not required, it did not include such whistleblower protection language in its employment agreements until 2019 and in its releases until 2023—after the Commission’s investigation commenced.

Without admitting or denying the Commission’s findings, D. E. Shaw agreed to be censured, to cease and desist from violating the whistleblower protection rule, and to pay a $10 million civil penalty.

Key Takeaways

We expect that a significant number of private and public companies use language similar to either the CBRE Representation or the D.E. Shaw Representation in their separation documentation, so it is likely time for you to take another pass through your separation agreements, releases, employment agreements, confidentiality agreements, and similar documents for any offending language. In particular, you should remain on the lookout for the following language when reviewing your documentation:

  • Broad confidentiality, non-disclosure and non-disparagement provisions, in each case without a carve-out for communicating to the government pursuant to whistleblower or other similar laws;
  • Provisions restricting the reporting of information to the government, or participating in or cooperating with governmental investigations, including requirements to obtain permission from or notify the company of such reporting/cooperation;
  • Waivers that attempt to restrict an employee’s rights to receive whistleblower awards from the government or severance or other compensation from the company for communicating to the government pursuant to applicable whistleblower laws; and
  • Representations in a severance agreement that the employee/former employee has not previously communicated with or made complaints to the government.

If you are unwilling to eliminate the representation described in the last bullet point above in its entirety, we recommend that you at least carve out any “claims, communications or cooperation with, or the provision of information to, any governmental agency or entity, as provided for, protected under or warranted by whistleblower or other similar provisions of applicable law or regulation” from the representation.

Finally, once you have taken another pass through your documentation, you should consider training employees to comply with Rule 21F-17 to the extent you have not done so, as the rule also covers any behavior to impede a whistleblower from communicating possible illegal conduct to the Commission. The training should also cover Section 21F(h) of the Exchange Act, which prohibits retaliatory behavior against employees for the external reporting of potential securities law violations.

It is important to note that you do not get a pass if you are a privately held company. Private companies are also subject to Rule 21F-17, and the Commission has pursued enforcement actions against private companies for violations of the rule.

As Gurbir Grewal, Director of the Commission’s Division of Enforcement, stated in the press release regarding the settlement with D.E. Shaw, “Entities employing confidentiality, separation, employment and other related agreements should take careful notice of today’s enforcement action. The Commission takes seriously the enforcement of whistleblower protections and those drafting or using these types of agreements should take equally serious their obligations to ensure that they don’t impede whistleblowers from contacting the Commission.”

[i] See SEC: Companies Cannot Stifle Whistleblowers in Confidentiality Agreements (April 1, 2015).
[ii] See

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