In re NeuStar
summary
NeuStar, Inc. violated SEC Rule 21F-17 by including overly broad nondisparagement and forfeiture clauses in severance agreements with at least 246 former employees between 2011 and 2015, chilling protected whistleblower communications with regulators, and agreed to a cease-and-desist order, civil penalty of $180,000, and mandatory notifications to affected employees.
paragraph
NeuStar, Inc. violated SEC Rule 21F-17 by embedding unlawful nondisparagement and forfeiture clauses in severance agreements signed by at least 246 departing employees between August 2011 and May 2015, which implicitly deterred them from communicating with the SEC about potential securities violations. Although the clauses were never enforced, the SEC found they created a chilling effect on whistleblower activity, in violation of Dodd-Frank Act protections. As part of a settled order, NeuStar agreed to pay a $180,000 civil penalty, revise its agreements to explicitly affirm whistleblower rights, notify all affected employees of their rights, and provide them with a copy of the SEC’s order.
narrative
NeuStar, Inc., a Delaware corporation whose Class A common stock trades on the NYSE, violated SEC Rule 21F-17 by including overly broad nondisparagement and forfeiture clauses in voluntary severance agreements with at least 246 former employees between August 12, 2011, and May 21, 2015. These clauses prohibited employees from making any communication that 'disparages' NeuStar or its affiliates—including regulators like the SEC—under threat of forfeiting all but $100 of severance pay, thereby chilling protected whistleblower communications even though never enforced. The SEC determined this conduct violated the whistleblower protections established under the Dodd-Frank Act, which explicitly prohibits employers from impeding direct communication with the Commission. NeuStar consented to a cease-and-desist order without admitting or denying the findings, agreed to pay a $180,000 civil penalty, and committed to revising its severance agreements to explicitly affirm employees’ rights to report securities violations to regulators. The company must notify all affected former employees of their rights under Rule 21F-17, provide them with a copy of the SEC’s order upon request, and submit a compliance certification within 60 days. Failure to pay the penalty within 30 days will incur interest under 31 U.S.C. §3717, and NeuStar must maintain records of compliance for future review.
Classified obstruction(confidence 100%). No EDGAR filing fingerprint (criminal/DOJ-side scheme). detection rule →
Statutes
31 U.S.C. §3717SECTION 21C OF THE SECURITIES EXCHANGE ACTSection 21F of the Securities Exchange ActRule 21F-17
Parties
Securities and Exchange CommissionNeuStar, Inc.
Keywords
neustarcommissionexchangesecurities exchangerespondentsecuritiesnondisparagement clauseorderexchange commissionproceedingsclausepursuantseveranceemployeesnondisparagement
Extracted insights
Dollar amounts 2
- $180K $180,000 $100K–$1M
- $100 $100 <$10K
Triples 10
- Securities and Exchange Commission deems appropriate cease-and-desist proceedings be instituted
- Respondent has submitted Offer of Settlement
- Commission has determined to accept Offer of Settlement
- Respondent consents to entry of this Order
- NeuStar is Delaware corporation headquartered in Sterling, Virginia
- NeuStar had approximately 2,125 employees
- Dodd-Frank Wall Street Reform and Consumer Protection Act amended Exchange Act by adding Section 21F
- Commission adopted Rule 21F-17
- Respondent entered into voluntary severance agreements with employees
- Respondent amended those agreements to strike the language at issue
PDF
Text layers
Extracted body text (10,521c)
UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 79593 / December 19, 2016
ADMINISTRATIVE PROCEEDING
File No. 3-17736
In the Matter of
NeuStar, Inc.,
Respondent.
ORDER INSTITUTING CEASE-AND-
DESIST PROCEEDINGS PURSUANT TO
SECTION 21C OF THE SECURITIES
EXCHANGE ACT OF 1934, MAKING
FINDINGS, AND IMPOSING REMEDIAL
SANCTIONS AND 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 NeuStar, Inc. (“NeuStar” or “Respondent”).
II.
In anticipation of the institution of these proceedings, Respondent 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, Respondent 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 Remedial Sanctions and a Cease-and-Desist Order (“Order”), as set forth
below.
III.
On the basis of this Order and Respondent’s Offer, the Commission finds
1
that:
Respondent
1. NeuStar is a Delaware corporation headquartered in Sterling, Virginia. NeuStar’s
Class A common stock is registered with the Commission pursuant to Section 12(b) of the
Exchange Act and trades on the New York Stock Exchange. NeuStar files periodic reports,
including reports on Forms 10-K and 10-Q, with the Commission pursuant to Section 13(a) of the
1
The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on any
other person or entity in this or any other proceeding.
Exchange Act and related rules thereunder. As of December 31, 2015, NeuStar had approximately
2,125 employees.
Facts
A. Statutory and Regulatory Framework Protecting Whistleblowers
2. The Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted on July
21, 2010, amended the Exchange Act by adding Section 21F, “Whistleblower Incentives and
Protection.” The purpose of these provisions was to encourage whistleblowers to report possible
securities law violations by providing, among other things, financial incentives and 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. 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. NeuStar’s Nondisparagement Clause
4. Beginning around 2008, and continuing through approximately May 21, 2015,
Respondent entered into voluntary severance agreements with employees who were leaving the
company. A severance agreement is a contract between an employer and a former employee
documenting the rights and responsibilities of both parties incidental to the employee’s departure.
Respondent continues to enter into voluntary severance agreements with departing employees, but
beginning approximately May 21, 2015, Respondent amended those agreements to strike the
language at issue below.
5. Respondent’s severance agreements included a “Nondisparagement” clause (the
“Nondisparagement Clause”) which read:
[E]xcept as specifically authorized in writing by NeuStar or as may be required by law or
legal process, I agree not to engage in any communication that disparages, denigrates,
maligns or impugns NeuStar or its officers, directors, shareholders, investors, potential
investors, partners, predecessors, subsidiaries, employees, consultants, attorneys, or any
others associated with NeuStar, including but not limited to communications with
accountants, investment bankers, commercial bankers, insurance brokers or carriers, media,
journalists, reporters, equity analysts, investors, potential investors, customers, suppliers,
competitors, joint venture partners and regulators (including but not limited to the
Securities and Exchange Commission, the Federal Communications Commission, the
Canadian Radio-television Telecommunications Commission, the North American
Numbering Council, the Canadian LNP Consortium, Inc., the LNPA Working Group, the
United States Department of Commerce, the Internet Corporation for Assigned Names and
Numbers, the Alliance for Telecommunications Industry Solutions, the North American
Portability Management, LLC, public utility commissions and industry associations
(including but not limited to the GSM Association, the United States Telecom Association,
CTIA-The Wireless Association and CompTel)) (emphasis added).
6. A separate provision of each severance agreement required the former employee to
acknowledge that a breach of the Nondisparagement Clause “would cause irreparable injury and
damage to Neustar.” This provision also compelled forfeiture of all but $100 of any severance
compensation paid to the former employee in the event of such a breach (the “Forfeiture Clause”).
7. From August 12, 2011 to approximately May 21, 2015, at least 246 employees
signed severance agreements that contained verbatim recitations of the Nondisparagement Clause
and the Forfeiture Clause.
8. Although the Commission is unaware of any instances in which NeuStar took steps
to enforce the Nondisparagement Clause, at least one former NeuStar employee was impeded by
the Nondisparagement Clause from communicating with the Commission.
Violation
9. Through its conduct described above, NeuStar violated Rule 21F-17 under the
Exchange Act.
Remedial Steps Taken By NeuStar
10. Promptly after the Commission staff’s investigation began and on its own accord,
NeuStar revised its severance agreement template by removing any reference to “regulators” from
its prohibition on “disparaging” communications and replacing it with language affirmatively
advising former employees of their right to contact regulators with concerns about potential legal
or regulatory violations. The revised Nondisparagement Clause now states:
In addition, nothing herein prohibits me from communicating, without notice to or approval
by Neustar, with any federal government agency about a potential violation of a federal law
or regulation.
Undertakings
11. NeuStar undertakes that, within sixty (60) days from the date the Commission
enters this Order, NeuStar will make reasonable efforts to contact former NeuStar employees who
signed a severance agreement at any time between August 12, 2011 and May 21, 2015, and
provide them with an Internet link to the Order
2
and a statement that NeuStar does not prohibit
former employees from communicating any concerns about potential violations of law or
regulation to the Securities and Exchange Commission
12. NeuStar undertakes to certify, in writing, its compliance with paragraph 11 above.
The certification shall provide written evidence of compliance in the form of a narrative, and be
supported by exhibits sufficient to demonstrate compliance. The Commission staff may make
reasonable requests for further evidence of compliance, and NeuStar agrees to provide such
evidence. The certification and supporting material shall be submitted to Antonia Chion, Associate
2
NeuStar further agrees to provide a paper copy of the Order to any former employee who requests it.
Director, with a copy to the Office of the Chief Counsel of the Enforcement Division, no later than
sixty (60) days from the date of completion of the undertakings.
13. In determining whether to accept the Offer, the Commission has considered each of
the undertakings set forth above.
IV.
In view of the foregoing, the Commission deems it appropriate to impose the sanctions
agreed to in Respondent NeuStar’s Offer.
Accordingly, it is hereby ORDERED that:
A. Pursuant to Section 21C of the Exchange Act, Respondent NeuStar cease and desist
from committing or causing any violations and any future violations of Rule 21F-17 of the
Exchange Act;
B. Respondent shall comply with the undertakings set forth herein;
C. Respondent shall, within thirty (30) days of the entry of this Order, pay a civil
money penalty in the amount of $180,000 to the Securities and Exchange Commission for
transfer to the general fund of the United States Treasury in accordance with Exchange Act
Section 21F(g)(3). If timely payment is not made, additional interest shall accrue pursuant to 31
U.S.C. §3717. 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
NeuStar 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 Antonia Chion, Associate Director,
Division of Enforcement, Securities and Exchange Commission, 100 F Street, N.E., Washington,
DC 20549.
By the Commission.
Brent J. Fields
Secretary OCR text (10,737c · tika · 95% conf)
UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 79593 / December 19, 2016
ADMINISTRATIVE PROCEEDING
File No. 3-17736
In the Matter of
NeuStar, Inc.,
Respondent.
ORDER INSTITUTING CEASE-AND-
DESIST PROCEEDINGS PURSUANT TO
SECTION 21C OF THE SECURITIES
EXCHANGE ACT OF 1934, MAKING
FINDINGS, AND IMPOSING REMEDIAL
SANCTIONS AND 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 NeuStar, Inc. (“NeuStar” or “Respondent”).
II.
In anticipation of the institution of these proceedings, Respondent 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, Respondent 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 Remedial Sanctions and a Cease-and-Desist Order (“Order”), as set forth
below.
III.
On the basis of this Order and Respondent’s Offer, the Commission finds1 that:
Respondent
1. NeuStar is a Delaware corporation headquartered in Sterling, Virginia. NeuStar’s
Class A common stock is registered with the Commission pursuant to Section 12(b) of the
Exchange Act and trades on the New York Stock Exchange. NeuStar files periodic reports,
including reports on Forms 10-K and 10-Q, with the Commission pursuant to Section 13(a) of the
1 The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on any
other person or entity in this or any other proceeding.
Exchange Act and related rules thereunder. As of December 31, 2015, NeuStar had approximately
2,125 employees.
Facts
A. Statutory and Regulatory Framework Protecting Whistleblowers
2. The Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted on July
21, 2010, amended the Exchange Act by adding Section 21F, “Whistleblower Incentives and
Protection.” The purpose of these provisions was to encourage whistleblowers to report possible
securities law violations by providing, among other things, financial incentives and 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. 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. NeuStar’s Nondisparagement Clause
4. Beginning around 2008, and continuing through approximately May 21, 2015,
Respondent entered into voluntary severance agreements with employees who were leaving the
company. A severance agreement is a contract between an employer and a former employee
documenting the rights and responsibilities of both parties incidental to the employee’s departure.
Respondent continues to enter into voluntary severance agreements with departing employees, but
beginning approximately May 21, 2015, Respondent amended those agreements to strike the
language at issue below.
5. Respondent’s severance agreements included a “Nondisparagement” clause (the
“Nondisparagement Clause”) which read:
[E]xcept as specifically authorized in writing by NeuStar or as may be required by law or
legal process, I agree not to engage in any communication that disparages, denigrates,
maligns or impugns NeuStar or its officers, directors, shareholders, investors, potential
investors, partners, predecessors, subsidiaries, employees, consultants, attorneys, or any
others associated with NeuStar, including but not limited to communications with
accountants, investment bankers, commercial bankers, insurance brokers or carriers, media,
journalists, reporters, equity analysts, investors, potential investors, customers, suppliers,
competitors, joint venture partners and regulators (including but not limited to the
Securities and Exchange Commission, the Federal Communications Commission, the
Canadian Radio-television Telecommunications Commission, the North American
Numbering Council, the Canadian LNP Consortium, Inc., the LNPA Working Group, the
United States Department of Commerce, the Internet Corporation for Assigned Names and
Numbers, the Alliance for Telecommunications Industry Solutions, the North American
Portability Management, LLC, public utility commissions and industry associations
(including but not limited to the GSM Association, the United States Telecom Association,
CTIA-The Wireless Association and CompTel)) (emphasis added).
6. A separate provision of each severance agreement required the former employee to
acknowledge that a breach of the Nondisparagement Clause “would cause irreparable injury and
damage to Neustar.” This provision also compelled forfeiture of all but $100 of any severance
compensation paid to the former employee in the event of such a breach (the “Forfeiture Clause”).
7. From August 12, 2011 to approximately May 21, 2015, at least 246 employees
signed severance agreements that contained verbatim recitations of the Nondisparagement Clause
and the Forfeiture Clause.
8. Although the Commission is unaware of any instances in which NeuStar took steps
to enforce the Nondisparagement Clause, at least one former NeuStar employee was impeded by
the Nondisparagement Clause from communicating with the Commission.
Violation
9. Through its conduct described above, NeuStar violated Rule 21F-17 under the
Exchange Act.
Remedial Steps Taken By NeuStar
10. Promptly after the Commission staff’s investigation began and on its own accord,
NeuStar revised its severance agreement template by removing any reference to “regulators” from
its prohibition on “disparaging” communications and replacing it with language affirmatively
advising former employees of their right to contact regulators with concerns about potential legal
or regulatory violations. The revised Nondisparagement Clause now states:
In addition, nothing herein prohibits me from communicating, without notice to or approval
by Neustar, with any federal government agency about a potential violation of a federal law
or regulation.
Undertakings
11. NeuStar undertakes that, within sixty (60) days from the date the Commission
enters this Order, NeuStar will make reasonable efforts to contact former NeuStar employees who
signed a severance agreement at any time between August 12, 2011 and May 21, 2015, and
provide them with an Internet link to the Order2 and a statement that NeuStar does not prohibit
former employees from communicating any concerns about potential violations of law or
regulation to the Securities and Exchange Commission
12. NeuStar undertakes to certify, in writing, its compliance with paragraph 11 above.
The certification shall provide written evidence of compliance in the form of a narrative, and be
supported by exhibits sufficient to demonstrate compliance. The Commission staff may make
reasonable requests for further evidence of compliance, and NeuStar agrees to provide such
evidence. The certification and supporting material shall be submitted to Antonia Chion, Associate
2 NeuStar further agrees to provide a paper copy of the Order to any former employee who requests it.
Director, with a copy to the Office of the Chief Counsel of the Enforcement Division, no later than
sixty (60) days from the date of completion of the undertakings.
13. In determining whether to accept the Offer, the Commission has considered each of
the undertakings set forth above.
IV.
In view of the foregoing, the Commission deems it appropriate to impose the sanctions
agreed to in Respondent NeuStar’s Offer.
Accordingly, it is hereby ORDERED that:
A. Pursuant to Section 21C of the Exchange Act, Respondent NeuStar cease and desist
from committing or causing any violations and any future violations of Rule 21F-17 of the
Exchange Act;
B. Respondent shall comply with the undertakings set forth herein;
C. Respondent shall, within thirty (30) days of the entry of this Order, pay a civil
money penalty in the amount of $180,000 to the Securities and Exchange Commission for
transfer to the general fund of the United States Treasury in accordance with Exchange Act
Section 21F(g)(3). If timely payment is not made, additional interest shall accrue pursuant to 31
U.S.C. §3717. 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
http://www.sec.gov/about/offices/ofm.htm
Payments by check or money order must be accompanied by a cover letter identifying
NeuStar 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 Antonia Chion, Associate Director,
Division of Enforcement, Securities and Exchange Commission, 100 F Street, N.E., Washington,
DC 20549.
By the Commission.
Brent J. Fields
Secretary