The US Securities and Exchange Commission (SEC) has settled charges against a Florida-based wholly owned subsidiary of ASX-listed GQG Partners 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.
Namely, the US watchdog found that GQG Partners LLC violated a whistleblower protection rule, which prohibits action to impede an individual from communicating directly with the SEC staff about a possible securities law violation.
GQG has agreed to be censured, to cease and desist from violating the whistleblower protection rule, and to pay a $500,000 civil penalty. However, the company allegedly has not yet admitted or denied the findings.
The ASX-listed firm saw a notable share price fall on the back of the news, down 3.47 per cent by end of trading on Friday – a notable switch up from the 94.4 per cent gains it has seen over the last 12 months.
InvestorDaily reached out to GQG for comment following the announcement.
“GQG takes its regulatory compliance obligations very seriously. We appreciate the professionalism displayed by the SEC staff throughout this inquiry,” the company said.
“We believe that we are well positioned to serve our team and clients going forward.”
The details
According to the SEC, from November 2020 through September 2023, the registered investment adviser entered into non-disclosure agreements (NDA) 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 said.
Moreover, it was found that GQG entered into a settlement agreement with a former employee, whose counsel informed GQG that this individual 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,” the SEC wrote.
These provisions, it confirmed, violated the whistleblower protection Rule 21F-17(a).
“Whether through agreements or otherwise, firms cannot impose barriers to persons providing evidence about possible securities law violations to the SEC, as GQG did,” Corey Schuster, the SEC’s co-chief of the division of enforcement’s asset management unit, said.
“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,” Schuster said.
