A U.S. company has agreed to settle allegations that it violated securities rules intended to ensure that potential whistleblowers are free to report possible violations to regulators without fear of retribution.

The U.S. Securities and Exchange Commission (SEC) Wednesday announced its first-ever enforcement action against a company for improperly imposing confidentiality requirements on its employees that could impede whistleblowers.

Without admitting or denying the allegations, Houston-based, KBR Inc., agreed to pay a US$130,000 penalty to settle the charges. It also voluntarily amended the confidentiality statements that it uses in internal investigations to ensure that it’s clear employees are free to report possible violations to the SEC and other federal agencies, without the approval of the company, or fear of retaliation.

According to the SEC’s order settling the case, the firm didn’t specifically prevent employees from communicating with the SEC about possible securities law violations. Rather, it says that the confidentiality provisions have a potential chilling effect on whistleblowers’ willingness to report illegal conduct to the SEC. The commission says that KBR required witnesses in certain internal investigations to sign confidentiality statements warning that they could face discipline, and even be fired, if they discussed the content of the interviews with outside parties without the prior approval of KBR’s legal department.

“By requiring its employees and former employees to sign confidentiality agreements imposing pre-notification requirements before contacting the SEC, KBR potentially discouraged employees from reporting securities violations to us,” said Andrew Ceresney, director of the SEC’s division of enforcement.

“SEC rules prohibit employers from taking measures through confidentiality, employment, severance, or other type of agreements that may silence potential whistleblowers before they can reach out to the SEC. We will vigorously enforce this provision,” he added.

“KBR changed its agreements to make clear that its current and former employees will not have to fear termination or retribution or seek approval from company lawyers before contacting us.” said Sean McKessy, chief of the SEC’s Office of the Whistleblower. “Other employers should similarly review and amend existing and historical agreements that in word or effect stop their employees from reporting potential violations to the SEC.”

The Ontario Securities Commission (OSC) is currently consulting on its own proposed whistleblower program. Its proposals, which are out for comment until May 4, indicate that the OSC could request legislative amendments to introduce anti-retaliation provisions if it adopts its program. This would include provisions making it a violation of the Securities Act to retaliate against a whistleblower, and providing whistleblowers who do experience workplace retaliation with the ability to sue their employer.