SEC Charges Monolith Resources for Violating Whistleblower Protection Rules

SEC Charges Monolith Resources for Violating Whistleblower Protection Rules


The U.S. Securities and Exchange Commission (SEC) has announced that it has settled charges against Monolith Resources LLC, a privately held energy and technology company based in Lincoln, Nebraska. Monolith has been charged with employing employee separation agreements that violated the SEC's whistleblower protection rules.

According to the SEC's order, the violations occurred between February 2020 and early March 2023. During this period, Monolith Resources required certain departing employees to sign separation agreements that effectively waived their rights to potential monetary whistleblower awards. These awards are typically associated with filing claims or participating in investigations conducted by government agencies, such as the SEC.

The SEC's order emphasizes that Monolith's use of such separation agreements created obstacles for employees who might have otherwise been encouraged to communicate directly with SEC staff regarding possible violations of securities laws.

Protecting Whistleblower Rights

The whistleblower program established by the SEC is designed to incentivize individuals to report potential securities law violations directly to the Commission. Offering financial incentives for such reporting is a key component of this program. The SEC's whistleblower protection rules are intended to safeguard these incentives and ensure that employees are not discouraged or impeded from communicating with SEC staff.

Commenting on the settlement, Jason J. Burt, Regional Director of the SEC's Denver Office, stressed the importance of maintaining an environment where employees can freely communicate with regulators about potential violations. He stated, "Both private and public companies must understand that they cannot take actions or use separation agreements that in any way disincentivize employees from communicating with SEC staff about potential violations of the federal securities laws."

Monolith's Response and Settlement

Monolith Resources LLC has agreed to the settlement without admitting or denying the SEC's findings. As part of the settlement, the company 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. This penalty takes into account the company's remedial actions, which include notifying former employees who signed the improper separation agreements that these agreements do not restrict their ability to receive financial awards in connection with providing information to government agencies.

This settlement serves as a reminder to both private and public companies that they must refrain from employing any practices or agreements that discourage employees from communicating with regulators like the SEC regarding potential violations of federal securities laws. Such actions not only undermine regulatory oversight but may also result in penalties and legal consequences.