SEC Charges Privately Held Monolith Resources for Using Separation Agreements that Violated Whistleblower Protection Rules

The Securities and Exchange Commission (SEC) has announced that it has settled charges against Monolith Resources LLC, a privately held energy and technology company headquartered in Lincoln, Nebraska, for violating the SEC’s whistleblower protection rules through the use of employee separation agreements.

According to the SEC’s order, between February 2020 and early March 2023, Monolith required certain departing employees to sign separation agreements that waived their rights to receive monetary whistleblower awards related to filing claims with or participating in investigations by government agencies. The SEC’s order states that these separation agreements created obstacles to employees’ participation in the SEC’s whistleblower program by discouraging them from reporting potential securities law violations directly to SEC staff, which is against the program’s intent.

Jason J. Burt, Regional Director of the SEC’s Denver Office, emphasized that both private and public companies must refrain from using actions or agreements that deter employees from communicating with SEC staff about possible securities law violations. Such attempts to stifle communication undermine regulatory oversight and will be dealt with accordingly.

The SEC’s order finds Monolith in violation of Securities Exchange Act of 1934 Rule 21F-17. Without admitting or denying the findings, Monolith has consented to cease and desist from committing or causing violations of the SEC’s whistleblower protection rules. Additionally, Monolith has agreed to pay a civil penalty of $225,000, taking into account its remedial actions, which include notifying former employees who signed improper separation agreements that these agreements do not limit their ability to obtain financial awards when providing information to government agencies.