The Securities and Exchange Commission today announced settled charges against Florida-based GQG Partners LLC, a registered investment adviser, for entering into agreements with candidates for employment and a former employee that made it more difficult for them to report potential securities law violations to the SEC.
According to the SEC’s order, from November 2020 through September 2023, GQG entered into non-disclosure agreements with 12 candidates for employment that prohibited them from disclosing confidential information about GQG, including to government agencies. While the agreements permitted the candidates to respond to requests for information from the Commission, it required notification to GQG of any such request and prohibited responding to requests arising from a candidate’s voluntary disclosure.
The SEC’s order finds that GQG also entered into a settlement agreement with a former employee whose counsel had told GQG that he or she intended to report alleged securities law violations to the Commission. Specifically, the settlement agreement said that it permitted reporting possible securities law violations to government agencies, including the Commission; however, it also required the former employee to affirm that he or she had not done so; was not aware of facts that would support an investigation; and would withdraw any statements already made that might support an investigation. These provisions violated the whistleblower protection rule.
“Whether through agreements or otherwise, firms cannot impose barriers to persons providing evidence about possible securities law violations to the SEC, as GQG did,” said Corey Schuster, Co-Chief of the Division of Enforcement’s Asset Management Unit. “Even agreements that contain carve-out language allowing people to voluntarily report to the SEC can be violative if restrictive language in a separate provision impedes voluntary reporting to the Commission staff.”
The SEC’s order finds that GQG violated whistleblower protection Rule 21F-17(a), which prohibits any action to impede an individual from communicating directly with the SEC staff about a possible securities law violation. Without admitting or denying the SEC’s findings, GQG agreed to be censured, to cease and desist from violating the whistleblower protection rule, and to pay a $500,000 civil penalty.
The SEC’s investigation was conducted by Marie DeBonis, Marilyn Ampolsk, and Brian Fitzpatrick, and supervised by Virginia Rosado Desilets, Mr. Schuster, and Andrew Dean, all of the Asset Management Unit.
