Can’t we just ask the regulator?: Difference between revisions

== JPMorgan, the NDA and the whistleblowers ==

So we hear that JPMorgan agreed to pay the [[SEC]] a US$18m fine for signing [[confidentiality agreement]]s that violated Rule 21F-17(a) of the [[Securities Exchange Act of 1934]] prohibiting action that impedes communication with the [[Securities and Exchange Commission|SEC]] about possible securities law violation. We don’t know the specifics, but it doesn’t seem to be alleged that Morgan intended this, or that it took any positive steps to enforce its NDAs in this way, but rather that the confidentiality agreements ''might'' have had that effect, or been used this way.

If that is right then we have a wholesale rewrite of confidentiality agreements about to descend on us. The NDA is a well-understood beast: its principles are pretty standardised, even if their articulation is not. One principle is “you may disclose confidential information to a regulator if you are firmly asked for it, or compelled to do so”.

The [[SEC]]’s whistleblowing rule requires something more than that: you must be free to disclose information that may indicate securities law violations ''if you feel like it''. No-one is ''obliged'' to be a whistleblower, however, so an [[Confidentiality agreement|NDA]] drafted along market standard terms would not, explicitly, permit whistleblowing. You might try to get home if you have a general “this agreement is to be read to be consistent with all laws as they apply to the parties” but you are reaching a bit here.

The SEC release agreed with JPMorgan said:

{{Quote|“[JPMS client] and [JPMS client’s] attorneys are neither prohibited nor restricted from responding to any inquiry about this settlement or its underlying facts by FINRA, the SEC, or any other government entity or self-regulatory organization or as required by law.”<ref>{{plainlink|https://www.sec.gov/files/litigation/admin/2024/34-99344.pdf|SEC settlement order}}</ref>}}

Editorialising for a bit — I know, right: who? me? — then unless JPMorgan wilfully meant to prevent whistleblowing, this seems like a ''bad'' precedent. Nothing in the {{Plainlink|https://www.sec.gov/news/press-release/2024-7|SEC’s press release}} about the fine indicates this is the case. So firstly, JPMorgan is being fined, basically, for agreeing to pretty standard NDAs.

In another facet of US justice administration, JPMorgan has agreed to the settlement without admission or denial of liability — perhaps taking the pragmatic view that a USD$18m fine is a drop in the ocean compared to the administrative time and burnt marital capital that it would take to contest such a charge. But in doing so, Morgan has acquiesced to a bad principle, thereby enacting it on everyone else.