On January 16, the U.S. Securities and Exchange Commission (SEC) announced settled charges against JP Morgan over allegations that the firm utilized confidential agreements which impeded clients from blowing the whistle to the SEC Whistleblower Program. JP Morgan agreed to pay $18 million, the largest ever penalty for a violation of SEC Rule 21F-17(a) which prohibits companies from impeding whistleblowing.

“The SEC’s sanction in this case sends a message that illegal nondisclosure agreements that obstruct the ability of employees or clients to report potential crimes to law enforcement will not be tolerated,” said leading whistleblower attorney Stephen M. Kohn of Kohn, Kohn & Colapinto. “This is an important step forward in cleaning up fraud on Wall Street.”

“Clients who were victimized by fraud can become very important whistleblowers, and they can qualify for rewards under the Dodd-Frank Act,” Kohn continued. “This decision makes it clear that NDAs restricting reporting to the SEC are illegal – whether the NDA covers an employee, a client, or an ‘analyst.’”

“In 2014, we filed the first NDA case with the SEC, which resulted in a small fine against KBR,” Kohn added. “The Commission’s decision to issue large sanctions in NDA cases is a major step forward for accountability, deterrence, and whistleblower rights.”

In September, the SEC issued a $10 million penalty against D.E. Shaw for Rule 21F-17(a) violations. In a piece for NYU Law’s Compliance and Enforcement blog, KKC’s Benjamin Calitri outlined why the penalty was a major step in SEC enforcement.

Geoff Schweller also contributed to this article.