In re Smart for Life

UNITED STATES OF AMERICA 
Before the 
SECURITIES AND EXCHANGE COMMISSION 
 
SECURITIES EXCHANGE ACT OF 1934 
Release No. 100974 / September 9, 2024 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-22083 
 
In the Matter of 
 
 
Smart for Life, Inc.,  
 
 
Respondent. 
 
 
 
 
ORDER INSTITUTING CEASE-AND-
DESIST PROCEEDINGS PURSUANT TO 
SECTION 21C OF THE SECURITIES 
EXCHANGE ACT OF 1934, MAKING 
FINDINGS, AND IMPOSING A CEASE-
AND-DESIST ORDER  
  
I. 
 
 The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-
and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities 
Exchange Act of 1934 (“Exchange Act”), against Smart for Life, Inc. (“Smart for Life” or 
“Respondent”).   
 
II. 
 
 In anticipation of the institution of these proceedings, Smart for Life has submitted an Offer 
of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the purpose 
of these proceedings and any other proceedings brought by or on behalf of the Commission, or to 
which the Commission is a party, and without admitting or denying the findings herein, except as 
to the Commission’s jurisdiction over it and the subject matter of these proceedings, which are 
admitted, Smart for Life consents to the entry of this Order Instituting Cease-and-Desist 
Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, 
and Imposing a Cease-and-Desist Order (“Order”), as set forth below.  
 
III. 
 
 On the basis of this Order and Smart for Life’s Offer, the Commission finds that:  
 
Respondent 
 
1. Smart for Life, a Delaware corporation based in Boca Raton, Florida, 
manufactures and sells nutritional and wellness products. Smart for Life’s common stock is 

 2 
registered with the Commission pursuant to Section 12(b) of the Exchange Act and is listed on the 
Nasdaq Stock Market under the ticker “SMFL.” In each of its periodic reports filed with the 
Commission since November 14, 2022, Smart for Life has represented that its financial condition 
raises substantial doubt about its ability to continue as a going concern.  
 
Facts 
 
A.  Statutory and Regulatory Framework Protecting Whistleblowers 
 
2. The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank 
Act”), enacted on July 21, 2010, amended the Exchange Act by adding Section 21F, 
“Whistleblower Incentives and Protection.” The congressional purpose underlying these provisions 
was “to encourage whistleblowers to report possible violations of the securities laws by providing 
financial incentives, prohibiting employment-related retaliation, and providing various 
confidentiality guarantees.” See Implementation of the Whistleblower Provisions of Section 21F of 
the Securities Exchange Act of 1934, Release No. 34-64545, at p. 197 (Aug. 12, 2011) (the 
“Adopting Release”). 
 
3. Congress explicitly noted the importance of providing financial incentives to 
promote whistleblowing to the Commission as it determined that “a critical component of the 
Whistleblower Program is the minimum payout that any individual could look towards in 
determining whether to take the enormous risk of blowing the whistle in calling attention to fraud.” 
See The Restoring American Financial Stability Act of 2010, Committee on Banking, Housing, and 
Urban Affairs (Apr. 30, 2010). 
 
4. To fulfill this congressional purpose, the Commission adopted Rule 21F-17, which 
provides in relevant part:  
 
(a)  No  person  may  take  any  action  to  impede  an  individual  from  communicating 
directly  with  the  Commission  staff  about  a  possible  securities  law  violation, 
including enforcing, or threatening to enforce, a confidentiality agreement . . . with 
respect to such communications. 
 
Rule 21F-17 became effective on August 12, 2011. 
 
B.  Smart for Life’s Separation Agreements 
 
5. As a regular part of its business, Smart for Life enters into separation agreements 
with certain employees who leave the company. A separation agreement is a contract between an 
employer and a departing employee documenting the rights and responsibilities of both parties 
incidental to the ending of the employment relationship. 
 
6. In May 2022, Smart for Life entered into a separation agreement that required a 
departing employee to waive his right to recover a monetary award for participating in an 
investigation by a government agency. Although the agreement expressly permitted participation 

 3 
in government whistleblower programs, it also required the departing employee to waive his right 
to a potential award. Specifically, the agreement stated, in relevant part:  
 
It  is  understood  that  this  release does  not  serve  to waive  any  rights  or claims  that, 
pursuant to law, cannot be waived or subject to a release of this kind, such as: . . . 
the right to file a charge with an administrative agency or participate  in an agency 
investigation; provided, however, that [the employee] hereby waives his right to 
recover any money in connection with such charge or investigation. 
 
(Emphasis added.) 
 
7. Similarly, in June 2023, Smart for Life entered into another separation agreement 
that, while expressly permitting the departing employee to participate in government whistleblower 
programs, required her to waive her right to recover a potential monetary award. This agreement 
stated: 
 
 This  General  Release  also  does  not  prevent  you  from  filing  a  charge  or 
complaint   with,   communicating   with,   or  participating   in an   investigation   or 
proceeding   conducted   by   the   Equal   Employment   Opportunity   Commission 
(EEOC),  the  Securities  and  Exchange  Commission  (SEC),  the  National  Labor 
Relations Board (NLRB), or any other federal, state, or local governmental agency 
or   commission (“Government  Agencies”). However,   to   the   fullest   extent 
permitted  by  law,  you  agree  that  you  are  waiving  the  right  to  monetary 
damages  or  other  equitable  or  monetary  relief  as  a  result of  any  charge, 
complaint, investigation, or proceeding. 
 
(Emphasis added.) 
 
8. Although the Commission is unaware of any instances in which Smart for Life took 
action to enforce the award-waiver provisions or in which the affected employees declined to 
speak with the Commission staff about potential violations of securities laws due to these 
provisions, these provisions created impediments to participation in the Commission’s 
whistleblower program by having the former employees forego the critically important financial 
incentives that are intended to encourage persons to communicate directly with the Commission 
staff about possible securities law violations. Such restrictions on accepting financial awards for 
providing information regarding possible securities law violations to the Commission undermine 
the purpose of Section 21F and Rule 21F-17(a), which is to “encourag[e] individuals to report to 
the Commission,” Adopting Release at p. 201, and violate Rule 21F-17(a) by impeding individuals 
from communicating directly with the Commission staff about possible securities law violations. 
9. Through the conduct described above, Smart for Life violated Exchange Act Rule 
21F-17(a), which prohibits any person from taking any action to impede an individual from 
communicating directly with the Commission staff about a possible securities law violation. 
 

 4 
Remedial Actions, Cooperation, and Financial Condition 
 
10. After being contacted by the Commission staff in connection with this matter, 
Smart for Life revised its internal agreement templates, adding language affirmatively advising 
employees that they are not prohibited from disclosing information to any governmental or 
regulatory authority, or collecting any related incentive awards. Smart for Life also used 
reasonable efforts to notify the affected employees that their employment and severance 
agreements do not in any way limit their ability to contact the Commission staff or to obtain an 
award in connection with information they provide. 
 
11. In determining to accept the Offer, the Commission considered remedial acts 
promptly undertaken by Smart for Life, cooperation afforded to the Commission staff, and Smart 
for Life’s apparent financial condition.  
 
12. In its most recent Form 10-Q for the period ended September 30, 2023, Smart for 
Life asserted that it had cash of $8,890 and has sustained recurring losses and has a deficiency in 
working capital of approximately $11.4 million and a net loss for the nine months ended 
September 30, 2023 of $12.8 million, which it stated raises substantial doubt about its ability to 
continue as a going concern. 
 
IV. 
 
 In view of the foregoing, the Commission deems it appropriate to impose the sanctions 
agreed to in Smart for Life’s Offer. 
 
 Accordingly, it is hereby ORDERED that: 
 
 A. Pursuant to Section 21C of the Exchange Act, Smart for Life cease and desist from 
committing or causing any violations and any future violations of Exchange Act Rule 21F-17(a). 
 
B. Based upon Smart for Life’s representations in its Form 10-Q for the period ended 
September 30, 2023, the Commission is not imposing a penalty greater than $19,500 against Smart 
for Life. Smart for Life shall pay a civil money penalty in the amount of $19,500 to the Securities 
and Exchange Commission for transfer to the general fund of the United States Treasury, subject to 
Exchange Act Section 21F(g)(3). Payment shall be made in the following installments: the first 
$5,000 within 10 days of the date of this Order, the second $5,000 within 180 days of the Order, 
the third $5,000 within 270 days of the Order, the fourth $4,500, plus all accrued interest, within 
360 days of the Order. Payments shall be applied first to post-order interest, which accrues 
pursuant to 31 U.S.C. § 3717. Prior to making the final payment set forth herein, Smart for Life 
shall contact the staff of the Commission for the amount due. If Smart for Life fails to make any 
payment by the date agreed or in the amount agreed according to the schedule set forth above, all 
outstanding payments under this Order, including post-order interest, minus any payments made, 
shall become due and payable immediately at the discretion of the staff of the Commission without 
further application to the Commission. 
 

 5 
Payment must be made in one of the following ways:  
 
(1) Respondent may transmit payment electronically to the Commission, which 
will provide detailed ACH transfer/Fedwire instructions upon request;  
 
(2) Respondent may make direct payment from a bank account via Pay.gov 
through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  
 
(3) Respondent may pay by certified check, bank cashier’s check, or United 
States postal money order, made payable to the Securities and Exchange 
Commission and hand-delivered or mailed to:  
 
Enterprise Services Center 
Accounts Receivable Branch 
HQ Bldg., Room 181, AMZ-341 
6500 South MacArthur Boulevard 
Oklahoma City, OK 73169 
 
Payments by check or money order must be accompanied by a cover letter identifying 
Smart for Life as a respondent in these proceedings, and the file number of these proceedings; a 
copy of the cover letter and check or money order must be sent to Nicholas P. Heinke, Associate 
Regional Director, Division of Enforcement, United States Securities and Exchange Commission, 
1961 Stout Street, Suite 1700, Denver, CO 80294. 
 
C. The Division of Enforcement (“Division”) may, at any time following the entry of 
this Order, petition the Commission to: (1) reopen this matter to consider whether Smart for Life 
provided accurate and complete financial information at the time representations in its Form 10-Q 
for the quarter ended September 30, 2023 were made; and (2) seek an order directing payment of 
the maximum civil penalty allowable under the law. No other issue shall be considered in 
connection with this petition other than whether the financial information disclosed by Smart for 
Life was fraudulent, misleading, inaccurate, or incomplete in any material respect. Smart for Life 
may not, by way of defense to any such petition: (1) contest the findings in this Order; (2) assert 
that payment of a penalty should not be ordered; (3) contest the imposition of the maximum 
penalty allowable under the law; or (4) assert any defense to liability or remedy, including, but not 
limited to, any statute of limitations defense.  
 
 
 
 
 
 
 
 
 
 

 6 
 D. Amounts ordered to be paid as civil money penalties pursuant to this Order shall be 
treated as penalties paid to the government for all purposes, including all tax purposes. To preserve 
the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor Action, it 
shall not argue that it is entitled to, nor shall it benefit by, offset or reduction of any award of 
compensatory damages by the amount of any part of Respondent’s payment of a civil penalty in 
this action (“Penalty Offset”). If the court in any Related Investor Action grants such a Penalty 
Offset, Respondent agrees that it shall, within thirty days after entry of a final order granting the 
Penalty Offset, notify the Commission’s counsel in this action and pay the amount of the Penalty 
Offset to the Securities and Exchange Commission. Such a payment shall not be deemed an 
additional civil penalty and shall not be deemed to change the amount of the civil penalty imposed 
in this proceeding. For purposes of this paragraph, a “Related Investor Action” means a private 
damages action brought against Respondent by or on behalf of one or more investors based on 
substantially the same facts as alleged in the Order instituted by the Commission in this 
proceeding. 
 
 By the Commission. 
 
 
 
Vanessa A. Countryman 
Secretary 
 
 

UNITED STATES OF AMERICA 

Before the 

SECURITIES AND EXCHANGE COMMISSION 

 

SECURITIES EXCHANGE ACT OF 1934 

Release No. 100974 / September 9, 2024 

 

ADMINISTRATIVE PROCEEDING 

File No. 3-22083 

 

In the Matter of 

 

 

Smart for Life, Inc.,  

 

 

Respondent. 

 

 

 

 

ORDER INSTITUTING CEASE-AND-

DESIST PROCEEDINGS PURSUANT TO 

SECTION 21C OF THE SECURITIES 

EXCHANGE ACT OF 1934, MAKING 

FINDINGS, AND IMPOSING A CEASE-

AND-DESIST ORDER  

  

I. 

 

 The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-

and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities 

Exchange Act of 1934 (“Exchange Act”), against Smart for Life, Inc. (“Smart for Life” or 

“Respondent”).   

 

II. 

 

 In anticipation of the institution of these proceedings, Smart for Life has submitted an Offer 

of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the purpose 

of these proceedings and any other proceedings brought by or on behalf of the Commission, or to 

which the Commission is a party, and without admitting or denying the findings herein, except as 

to the Commission’s jurisdiction over it and the subject matter of these proceedings, which are 

admitted, Smart for Life consents to the entry of this Order Instituting Cease-and-Desist 

Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, 

and Imposing a Cease-and-Desist Order (“Order”), as set forth below.  

 

III. 

 

 On the basis of this Order and Smart for Life’s Offer, the Commission finds that:  

 

Respondent 

 

1. Smart for Life, a Delaware corporation based in Boca Raton, Florida, 

manufactures and sells nutritional and wellness products. Smart for Life’s common stock is 



 2 

registered with the Commission pursuant to Section 12(b) of the Exchange Act and is listed on the 

Nasdaq Stock Market under the ticker “SMFL.” In each of its periodic reports filed with the 

Commission since November 14, 2022, Smart for Life has represented that its financial condition 

raises substantial doubt about its ability to continue as a going concern.  

 

Facts 

 

A.  Statutory and Regulatory Framework Protecting Whistleblowers 

 

2. The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank 

Act”), enacted on July 21, 2010, amended the Exchange Act by adding Section 21F, 

“Whistleblower Incentives and Protection.” The congressional purpose underlying these provisions 

was “to encourage whistleblowers to report possible violations of the securities laws by providing 

financial incentives, prohibiting employment-related retaliation, and providing various 

confidentiality guarantees.” See Implementation of the Whistleblower Provisions of Section 21F of 

the Securities Exchange Act of 1934, Release No. 34-64545, at p. 197 (Aug. 12, 2011) (the 

“Adopting Release”). 

 

3. Congress explicitly noted the importance of providing financial incentives to 

promote whistleblowing to the Commission as it determined that “a critical component of the 

Whistleblower Program is the minimum payout that any individual could look towards in 

determining whether to take the enormous risk of blowing the whistle in calling attention to fraud.” 

See The Restoring American Financial Stability Act of 2010, Committee on Banking, Housing, and 

Urban Affairs (Apr. 30, 2010). 

 

4. To fulfill this congressional purpose, the Commission adopted Rule 21F-17, which 

provides in relevant part:  

 

(a) No person may take any action to impede an individual from communicating 

directly with the Commission staff about a possible securities law violation, 

including enforcing, or threatening to enforce, a confidentiality agreement . . . with 

respect to such communications. 

 

Rule 21F-17 became effective on August 12, 2011. 

 

B.  Smart for Life’s Separation Agreements 

 

5. As a regular part of its business, Smart for Life enters into separation agreements 

with certain employees who leave the company. A separation agreement is a contract between an 

employer and a departing employee documenting the rights and responsibilities of both parties 

incidental to the ending of the employment relationship. 

 

6. In May 2022, Smart for Life entered into a separation agreement that required a 

departing employee to waive his right to recover a monetary award for participating in an 

investigation by a government agency. Although the agreement expressly permitted participation 



 3 

in government whistleblower programs, it also required the departing employee to waive his right 

to a potential award. Specifically, the agreement stated, in relevant part:  

 

It is understood that this release does not serve to waive any rights or claims that, 

pursuant to law, cannot be waived or subject to a release of this kind, such as: . . . 

the right to file a charge with an administrative agency or participate in an agency 

investigation; provided, however, that [the employee] hereby waives his right to 

recover any money in connection with such charge or investigation. 

 

(Emphasis added.) 

 

7. Similarly, in June 2023, Smart for Life entered into another separation agreement 

that, while expressly permitting the departing employee to participate in government whistleblower 

programs, required her to waive her right to recover a potential monetary award. This agreement 

stated: 

 

 This General Release also does not prevent you from filing a charge or 

complaint with, communicating with, or participating in an investigation or 

proceeding conducted by the Equal Employment Opportunity Commission 

(EEOC), the Securities and Exchange Commission (SEC), the National Labor 

Relations Board (NLRB), or any other federal, state, or local governmental agency 

or commission (“Government Agencies”). However, to the fullest extent 

permitted by law, you agree that you are waiving the right to monetary 

damages or other equitable or monetary relief as a result of any charge, 

complaint, investigation, or proceeding. 

 

(Emphasis added.) 

 

8. Although the Commission is unaware of any instances in which Smart for Life took 

action to enforce the award-waiver provisions or in which the affected employees declined to 

speak with the Commission staff about potential violations of securities laws due to these 

provisions, these provisions created impediments to participation in the Commission’s 

whistleblower program by having the former employees forego the critically important financial 

incentives that are intended to encourage persons to communicate directly with the Commission 

staff about possible securities law violations. Such restrictions on accepting financial awards for 

providing information regarding possible securities law violations to the Commission undermine 

the purpose of Section 21F and Rule 21F-17(a), which is to “encourag[e] individuals to report to 

the Commission,” Adopting Release at p. 201, and violate Rule 21F-17(a) by impeding individuals 

from communicating directly with the Commission staff about possible securities law violations. 

9. Through the conduct described above, Smart for Life violated Exchange Act Rule 

21F-17(a), which prohibits any person from taking any action to impede an individual from 

communicating directly with the Commission staff about a possible securities law violation. 

 



 4 

Remedial Actions, Cooperation, and Financial Condition 

 

10. After being contacted by the Commission staff in connection with this matter, 

Smart for Life revised its internal agreement templates, adding language affirmatively advising 

employees that they are not prohibited from disclosing information to any governmental or 

regulatory authority, or collecting any related incentive awards. Smart for Life also used 

reasonable efforts to notify the affected employees that their employment and severance 

agreements do not in any way limit their ability to contact the Commission staff or to obtain an 

award in connection with information they provide. 

 

11. In determining to accept the Offer, the Commission considered remedial acts 

promptly undertaken by Smart for Life, cooperation afforded to the Commission staff, and Smart 

for Life’s apparent financial condition.  

 

12. In its most recent Form 10-Q for the period ended September 30, 2023, Smart for 

Life asserted that it had cash of $8,890 and has sustained recurring losses and has a deficiency in 

working capital of approximately $11.4 million and a net loss for the nine months ended 

September 30, 2023 of $12.8 million, which it stated raises substantial doubt about its ability to 

continue as a going concern. 

 

IV. 

 

 In view of the foregoing, the Commission deems it appropriate to impose the sanctions 

agreed to in Smart for Life’s Offer. 

 

 Accordingly, it is hereby ORDERED that: 

 

 A. Pursuant to Section 21C of the Exchange Act, Smart for Life cease and desist from 

committing or causing any violations and any future violations of Exchange Act Rule 21F-17(a). 

 

B. Based upon Smart for Life’s representations in its Form 10-Q for the period ended 

September 30, 2023, the Commission is not imposing a penalty greater than $19,500 against Smart 

for Life. Smart for Life shall pay a civil money penalty in the amount of $19,500 to the Securities 

and Exchange Commission for transfer to the general fund of the United States Treasury, subject to 

Exchange Act Section 21F(g)(3). Payment shall be made in the following installments: the first 

$5,000 within 10 days of the date of this Order, the second $5,000 within 180 days of the Order, 

the third $5,000 within 270 days of the Order, the fourth $4,500, plus all accrued interest, within 

360 days of the Order. Payments shall be applied first to post-order interest, which accrues 

pursuant to 31 U.S.C. § 3717. Prior to making the final payment set forth herein, Smart for Life 

shall contact the staff of the Commission for the amount due. If Smart for Life fails to make any 

payment by the date agreed or in the amount agreed according to the schedule set forth above, all 

outstanding payments under this Order, including post-order interest, minus any payments made, 

shall become due and payable immediately at the discretion of the staff of the Commission without 

further application to the Commission. 

 



 5 

Payment must be made in one of the following ways:  

 

(1) Respondent may transmit payment electronically to the Commission, which 

will provide detailed ACH transfer/Fedwire instructions upon request;  

 

(2) Respondent may make direct payment from a bank account via Pay.gov 

through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  

 

(3) Respondent may pay by certified check, bank cashier’s check, or United 

States postal money order, made payable to the Securities and Exchange 

Commission and hand-delivered or mailed to:  

 

Enterprise Services Center 

Accounts Receivable Branch 

HQ Bldg., Room 181, AMZ-341 

6500 South MacArthur Boulevard 

Oklahoma City, OK 73169 

 

Payments by check or money order must be accompanied by a cover letter identifying 

Smart for Life as a respondent in these proceedings, and the file number of these proceedings; a 

copy of the cover letter and check or money order must be sent to Nicholas P. Heinke, Associate 

Regional Director, Division of Enforcement, United States Securities and Exchange Commission, 

1961 Stout Street, Suite 1700, Denver, CO 80294. 

 

C. The Division of Enforcement (“Division”) may, at any time following the entry of 

this Order, petition the Commission to: (1) reopen this matter to consider whether Smart for Life 

provided accurate and complete financial information at the time representations in its Form 10-Q 

for the quarter ended September 30, 2023 were made; and (2) seek an order directing payment of 

the maximum civil penalty allowable under the law. No other issue shall be considered in 

connection with this petition other than whether the financial information disclosed by Smart for 

Life was fraudulent, misleading, inaccurate, or incomplete in any material respect. Smart for Life 

may not, by way of defense to any such petition: (1) contest the findings in this Order; (2) assert 

that payment of a penalty should not be ordered; (3) contest the imposition of the maximum 

penalty allowable under the law; or (4) assert any defense to liability or remedy, including, but not 

limited to, any statute of limitations defense.  

 

 

 

 

 

 

 

 

 

 

http://www.sec.gov/about/offices/ofm.htm


 6 

 D. Amounts ordered to be paid as civil money penalties pursuant to this Order shall be 

treated as penalties paid to the government for all purposes, including all tax purposes. To preserve 

the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor Action, it 

shall not argue that it is entitled to, nor shall it benefit by, offset or reduction of any award of 

compensatory damages by the amount of any part of Respondent’s payment of a civil penalty in 

this action (“Penalty Offset”). If the court in any Related Investor Action grants such a Penalty 

Offset, Respondent agrees that it shall, within thirty days after entry of a final order granting the 

Penalty Offset, notify the Commission’s counsel in this action and pay the amount of the Penalty 

Offset to the Securities and Exchange Commission. Such a payment shall not be deemed an 

additional civil penalty and shall not be deemed to change the amount of the civil penalty imposed 

in this proceeding. For purposes of this paragraph, a “Related Investor Action” means a private 

damages action brought against Respondent by or on behalf of one or more investors based on 

substantially the same facts as alleged in the Order instituted by the Commission in this 

proceeding. 

 

 By the Commission. 

 

 

 

Vanessa A. Countryman 

Secretary 

 

 


	UNITED STATES OF AMERICA
	IV.