United States: Rule 21F–17: Guidance On Drafting Confidentiality And Non-Disclosure Agreements

Global Crisis Management Series: This post is part 9 in a series concerning topics further elaborated on in Cleary Gottlieb's Global Crisis Management Handbook—a desk reference for spotting issues and avoiding common mistakes when faced with a crisis. The current version is available here.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (" Dodd-Frank") goes further than other statutes in providing protection to whistleblowers. In addition to broadening prohibitions against retaliation, the Securities and Exchange Commission ("SEC") promulgated Rule 21F-17 to ensure companies could not interfere with an individual's efforts to raise concerns and communicate directly with the SEC.1

SEC Rule 21F–17(a) prohibits any person from "imped[ing] an individual from communicating directly with the [SEC] about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement."2 Following a series of enforcement actions in 2015 and 2016, the Office of Compliance Inspections and Examinations ("OCIE") issued a Risk Alert urging companies to evaluate whether their confidentiality and non-disclosure agreements, among other internal documentation, contained provisions that were inconsistent with Rule 21F–17.3 Companies can implement a few simple best practices to ensure compliance with Rule 21F–17.

Enforcement of Rule 21F17 (In re KBR, Inc.)

In April 2015, the SEC initiated its first enforcement action arising from a company's alleged violation of Rule 21F–17.4 KBR, Inc., a global defense contractor, was charged with violating Rule 21F–17 for its use of a confidentiality agreement that could have the effect of preventing employees from disclosing concerns directly to the SEC.

As part of its compliance program, KBR internally reviewed complaints regarding potential illegal conduct by its employees.5 When conducting interviews for the investigation, KBR would at times require witnesses to sign confidentiality agreements that precluded them from disclosing the facts underlying the investigation to anyone, absent consent from KBR's legal department. Any unauthorized disclosure, according to the agreement, could result in disciplinary action, including termination of employment. Similarly prohibitive language was included in the company's Code of Business Conduct Investigation Procedures manual.

Even though there was no specific instance in which KBR actually discouraged employees from communicating with the SEC, the SEC determined that the blanket prohibition "has a potential chilling effect on whistleblowers' willingness to report illegal conduct to the SEC."6 Moreover, the language "undermines the purpose of Section 21F and Rule 21F–17(a), which is to 'encourag[e] individuals to report to the Commission.'"7

Under the terms of the settlement, KBR agreed to, among other things, amend its standard form confidentiality agreement to make explicit that the agreement did not prevent individuals from reporting possible violations of federal law to governmental agencies or entities.

SEC Guidance and Best Practices for Drafting Confidentiality and Non-Disclosure Agreements

Following several additional settled enforcement actions related to Rule 21F–17, many of which took similarly aggressive readings of 21F–17, OCIE issued a Risk Alert notifying companies that it would conduct a review of "compliance manuals, codes of ethics, employment agreements, and severance agreements to determine whether provisions in those documents pertaining to confidentiality of information and reporting of possible securities law violations may raise concerns under Rule 21F-17."8

Specifically, OCIE identified provisions within confidentiality and other agreements that "contained language that, by itself or under the circumstances in which the agreements were used, impeded employees and former employees from communicating with the Commission concerning possible securities law violations." 9 In light of OCIE's renewed focus on Rule 21F–17, companies should review their confidentiality and non-disclosure agreements—as well as compliance manuals—to remove language that the SEC identified as problematic and should incorporate other lessons from the SEC's guidance.

Companies should explicitly state in policies and agreements that employees are not precluded from reporting potential violations of law to governmental regulators or providing information regarding the same. Nor should companies attempt to set limits on the types of information that can be shared with the SEC. The SEC warned against provisions that permit disclosures only insofar as required by law "without any exception for voluntary communications" with the SEC.10

Companies should also make clear that employees need not seek permission to communicate with the SEC before doing so. As the SEC stated in In re KBR, it takes the position that pre-notification requirements before contacting the SEC "potentially discourage[] employees from reporting securities violations."11

Finally, companies should not limit an employee's right to receive monetary awards from government agencies as a result of making disclosures, such as through Dodd-Frank's award program. In two enforcement matters following KBR, the SEC found provisions in severance agreements that required employees to waive their right to whistleblower awards to violate Rule 21F–17.12 Such provisions had a chilling effect on employees' willingness or interest to report concerns to the SEC.


Companies should review their compliance manuals, codes of ethics, employment agreements, severance agreements, and other documents to ensure that they do not contain language that could be viewed as inconsistent with Rule 21F–17. Keeping in mind OCIE's recent guidance could help avoid costly and burdensome regulatory inquiries.


1 15 U.S.C. § 78u-6(j).

2 17 C.F.R. § 240.21F–17(a).

3 Office of Compliance Inspections and Examinations, Examining Whistleblower Rule Compliance (Oct. 24, 2016) ("OCIE Guidance").

4 SEC, Companies Cannot Stifle Whistleblowers in Confidentiality Agreements (Apr. 1, 2015), https://www.sec.gov/news/pressrelease/2015-54.html.

5 KBR, Inc., Exchange Act Release No. 74619, 2015 WL 1456619 (Apr. 1, 2015).

6 SEC, Companies Cannot Stifle Whistleblowers in Confidentiality Agreements (Apr. 1, 2015), https://www.sec.gov/news/pressrelease/2015-54.html.

7 KBR, Inc., Exchange Act Release No. 74619, 2015 WL 1456619 (Apr. 1, 2015).

8 OCIE Guidance at 1.

9 Id. at 1-2.

10 Id. at 3.

11 SEC, Companies Cannot Stifle Whistleblowers in Confidentiality Agreements (Apr. 1, 2015), https://www.sec.gov/news/pressrelease/2015-54.html.

12 Health Net, Inc., Exchange Act Release No. 78590, 2016 WL 4474755 (Aug. 16, 2016); BlueLinx Holdings Inc., Exchange Act Release No. 78528, 2016 WL 4363864 (Aug. 10, 2016).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions