Key takeaways:

• Given the broad scope of the whistleblower rules promulgated under the U.S. Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and their application to public and private companies alike, U.S. private equity firms, and portfolio companies with operations in the United States, should take note of recent comments by the head of the SEC’s Office of the Whistleblower. The SEC is “actively looking for examples of confidentiality agreements, separation agreements, [and] employee agreements” that condition certain benefits on not reporting activities to regulators.
• Private equity firms and portfolio companies with operations in the United States should review their codes of conduct and existing agreements with current and former employees (including employment agreements, carried interest arrangements containing confidentiality and non-disparagement covenants, other confidentiality and non-disparagement agreements, and severance agreements) to ensure that those documents are not so broadly worded as to be viewed as inhibiting a potential whistleblower’s ability or incentive to report alleged misconduct to the SEC.
• Private equity firms and portfolio companies should also be cautious about enforcing broadly-worded confidentiality or non-disparagement covenants that do not contain an exception for regulatory reporting where there is a chance that (1) the enforcement of those provisions might be viewed as impeding a purported whistleblower’s ability to report conduct to the SEC or other regulatory bodies or (2) such action could be viewed as retaliation for suspected or known whistleblowing activities.