Authored by CM Law Partner Jonathan Scott, this client alert examines the SEC’s latest enforcement action against Foot Locker, which serves as a reminder that the SEC’s whistleblower retaliation rules remain a priority — even in a more industry-friendly regulatory environment.
The SEC has just filed a settled enforcement action against Foot Locker, Inc. over a standard severance agreement that required departing employees to waive their rights to seek an SEC whistleblower award. To settle the matter, Foot Locker agreed to pay a civil penalty of $148,000. This latest SEC action is a good reminder that even in a more industry-friendly era, the SEC will continue to take seriously any perceived chilling of whistleblower rights. As a result, companies need to continue to check internal policies and agreements to make sure they contain no provisions that could be perceived in any way to discourage employees from approaching the SEC with whistleblower complaints.
The SEC Whistleblower Retaliation Rule
SEC Rule 21F-17 prohibits any person or company (public or private) from taking action to impede an individual from communicating directly with the SEC staff about a possible securities law violation. This includes a prohibition on companies using NDAs or other agreements to limit employee contact with the SEC.
The SEC reads its authority under Rule 21F-17 broadly and takes it seriously. Indeed, since 2015, when the SEC filed its first action for impeding whistleblower reporting, it has filed 35 such actions against public and private companies, financial services firms and individuals.
The Foot Locker Action
According to the SEC’s May 22, 2026 Order, Foot Locker’s severance agreements specifically told severed employees that nothing in its agreement and release prohibited them from filing a charge or participating in an investigation by the SEC or other agencies. But the agreements also informed employees that “by signing this Agreement and General Release, you understand and agree that you are waiving the right to receive any award of monetary or other benefits or any other legal or equitable relief whatsoever resulting from any such charge or proceeding by you.”
Notably, to sustain its action, the SEC did not have to prove that a whistleblower was actually chilled, and the SEC acknowledged that it could not point to an instance where Foot Locker actually took action to enforce the agreement provision. But it asserted that “the Award Waiver Provision nonetheless raised impediments to participation in the Commission’s whistleblower program by requiring those individuals to forgo possible whistleblower awards in exchange for severance payments from Foot Locker.”
The SEC did credit Foot Locker for phasing out the violative provision before it was contacted by the SEC Enforcement staff and this may explain the relatively small penalty. But the Order also noted that the Company did not update all of its forms and continued to use the violative language in certain agreements for several months.
Takeaways for Companies
We do not know how the SEC became aware of Foot Locker’s severance agreement. But, ironically, any severed employee who read the provision and understood that it could violate the SEC’s whistleblower rules had an opportunity to file a whistleblower claim with the SEC and win an award for reporting a provision that prohibited seeking an award!
In other words, these types of provisions are low-hanging fruit for both potential whistleblowers and for the SEC. The SEC doesn’t need to prove intent. It doesn’t need to have a great witness. It doesn’t need to prove that anyone was actually prevented or dissuaded from bringing a whistleblower claim. It just needs to analyze the language of the policy or agreement against the language of the rule, and if it identifies a violation, it has the basis for an enforcement action that is very hard to defend.
Companies should use this latest SEC action as a reminder to re-examine and update policies and agreements and to consult with SEC and employment counsel if they have any concerns that a provision might run afoul of SEC rules. And they should do this now, rather than waiting for an employee to report the issue to the SEC. Indeed, reading between the lines of the Foot Locker Order, it is possible that if the company had completely remediated the issue before hearing from the Enforcement staff, the SEC may have been persuaded not to pursue an enforcement action at all.
For more information, please contact your CM Law LLP attorney or the author, Jonathan Scott, at jscott@cm.law.
CM Law (cm.law) – formerly Culhane Meadows – is the largest national, full-service, women-owned & managed (WBE) law firm in the United States. Designed to provide experienced attorneys with an optimal way to practice sophisticated law while maintaining a superior work/life balance, the firm offers fully remote work options, a transparent, merit and math-based compensation structure, and a collaborative culture. Serving a diverse clientele—from individuals and small businesses to over 40 Fortune-ranked companies—CM Law is committed to delivering exceptional legal services across a broad spectrum of industries.
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