RIA firm to pay $500K penalty to settle SEC charges over alleged whistleblower curbs

A registered investment advisor firm headquartered in Florida is to pay a $500,000 civil penalty to settle charges from the Securities and Exchange Commission relating to whistleblowing.

GQG Partners LLC was charged by the SEC for entering into agreements with employment candidates and a former employee that would make it harder for them to report potential violations of securities law to the agency.

The SEC order states that 12 potential hires signed non-disclosure agreements with GQG between November 2020 and September 2023 which prohibited them from disclosing any confidential information about the firm, even to government agencies. It did not preclude the sharing of requested information when inquiries were initiated by the SEC but stated that any such request was to be reported to GQG.

Further, the SEC order found that a former GQG employee had entered into a settlement agreement with the firm. The individual’s counsel had informed the firm of the former employee’s intention to report securities law violations to the SEC and other government agencies.

While the settlement did not prohibit the reporting, it 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 order states that GQG violated whistleblower protection Rule 21F-17(a) in prohibiting the ability of individuals to communicate with SEC staff about potential wrongdoing. GQG did not admit or deny the SEC’s findings but agreed to be censured, to cease and desist from violating the whistleblower protection rule, and to pay a $500,000 civil penalty.

CGQ is led by Rajiv Jain who has more than two decades of investment experience and is the driving force behind GQG's investment strategy. Before founding GQG, Jain was the CIO of emerging markets and global equities at Vontobel Asset Management, where he built a successful track record.

Earlier this year, the CFPB warned Financial services firms that require employees to sign nondisclosure agreements that are too broad could be breaking the law.