SEC Dings Brinks on Pre-taliation

Just in time for Throwback Thursday, cash management company Brinks Co. has agreed to pay $400,000 to settle charges from the Securities and Exchange Commission that its employment contracts included pre-taliation clauses — a whistleblower no-no that had been largely dormant since 2016.

As outlined in a settlement order quietly announced this week, the SEC accused Brinks of requiring new hires to sign confidentiality agreements that forbid the employees from disclosing confidential information to any third parties without first obtaining management approval. The prohibition was expansive enough to include bringing financial data and other internal records to regulators, which is exactly the sort of information one is likely to include in a whistleblower complaint. So in the SEC’s eyes, that qualifies as a pre-taliation clause that violates whistleblower protection rules.

This misstep is newsworthy because Brinks enforced those pre-taliation clauses well into 2019 — years after the SEC launched a highly publicized campaign against pre-taliation in 2016. That included numerous enforcement actions against companies that had such clauses, and announcing that pre-taliation clauses would be a priority in regulatory examinations for financial firms

whistleblowerLike, the SEC couldn’t have been any more clear that it no longer wanted to see these clauses. Compliance officers gossiped about pre-taliation all the time in late 2016, and law firms published enough legal bulletins on the subject to wallpaper the Astrodome. Still, Brinks let its problematic clauses linger into 2019.

Indeed, the allegations in the SEC order make Brinks look even worse. Throughout the relevant period, the company maintained two separate legal departments: one team in Dallas that managed employment law for rank-and-file employees, and another in Virginia for management. (I mean, wow. Most companies I know barely bother to resource one legal department.) The legal team for management did not include those pre-taliation clauses in their employment agreements, while the legal team for rank-and-file employees did

In April 2015, both legal groups received alerts from outside counsel warning that the SEC had just taken its first pre-taliation enforcement action, and would likely be bringing more cases. The Texas legal team, responsible for rank-and-file employees, not only left the pre-taliation language in there; it made its confidentiality agreements even more restrictive by adding a $75,000 penalty (plus Brinks’ attorney fees) ​​for any employee found to have violated the agreement.

The Texas legal group then used that more restrictive language for four years, until early 2019. (Roughly one year after Brinks became aware that the SEC was investigating the company for this very issue.)

In those four years with the problematic language, Brinks hired roughly  2,000 to 3,000 employees in the United States annually. Virtually all of them were required to sign confidentiality agreements that contained the restrictive provisions and the $75,000 financial penalty. Finally Brinks dispensed with that language in May 2019, and here we are.

As usual with SEC settlements, Brinks neither confirms nor denies the allegations against it. In addition to the $400,000 penalty, the company agreed to a cease-and-desist order and promised to include clear language in all employment contracts that, yes, employees can always bring concerns about corporate misconduct to regulators without impediment.

A Brief History of Pre-taliation

We last saw the SEC take a pre-taliation enforcement action in 2021, when it slapped Guggenheim Securities with a $209,000 fine for allowing these clauses in the late 2010s. That was the first case we’d seen since the 2016 enforcement crackdown, and now we have this action against Brinks too. 

I have said it before, and it still holds true: Pre-taliation clauses are one of the great unforced errors in corporate compliance. Do a keyword search in your policy manual and training examples, find any offending examples, and then press the Delete key. That’s your remediation. Everything else that might befall a firm for this offense doesn’t need to happen. 

We also have a statement about the case from SEC commissioner Hester Peirce, who said she supported a sanction against Brinks’ but didn’t like the expansive language that the SEC is requiring Brinks to include in its employment clauses. 

Specifically, Peirce said, SEC whistleblower rules are meant to assure the free flow of information to the Commission. But the settlement with Brinks requires the company to include language that says employees are free to communicate with any government agency.


“The Commission plainly lacks statutory authority to impose such a broad requirement, and [SEC whistleblower rules] do not purport to assert such authority… The Commission must be cautious about using the settlement process to obtain voluntary compliance with requirements that it lacks statutory authority to impose,” Peirce said.

Props to Peirce for keeping it real as a Republican appointee, although I’m not sure the corporate compliance community would support her carefully calibrated interpretation of whistleblowing. The state’s compelling interest is to prevent corporate misconduct. We can’t expect employees always to understand which regulator is the proper one to approach, so broad language is best. Plus, I’m not convinced that when Congress enacted Dodd-Frank, lawmakers intended such a narrow view as Peirce espouses. 

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