Business Group Faults SEC Over Whistle-Blower Protection Case

The U.S. Chamber of Commerce accused regulators of over-stretching their authority by sanctioning KBR Inc. for trying to block employees from reporting misdeeds.

In a letter Thursday to Securities and Exchange Commission Chair Mary Jo White, the business group asked the agency to clarify rules related to whistle-blower protections. The April 1 action against KBR was the first of its kind.

“This action is the result of a highly subjective interpretation and application of the SEC’s recently adopted whistle-blower rules,” said David Hirschmann, president of the group’s Center for Capital Markets Competitiveness in a letter to SEC Chair Mary Jo White. “The SEC is undertaking rulemaking through enforcement rather than the regular notice and comment process.”

According to the SEC, KBR violated whistle-blower protections by asking employees to sign agreements stating they weren’t permitted to discuss possible misconduct with anyone outside the company. KBR said it never actually prevented anyone from reporting to the SEC.

The SEC has come to rely more heavily on whistle-blowers since the 2010 Dodd-Frank Act gave it the authority to reward people whose tips lead to enforcement actions. The agency has more investigations underway into other companies suspected of blocking employees from coming forward, Enforcement Director Andrew Ceresney told reporters last week.

Florence Harmon, an SEC spokeswoman, declined to make an immediate comment on the letter.

Houston-based KBR agreed to pay $130,000 and to tell employees that they are free to talk to federal prosecutors or regulators.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE