The protection of whistleblowers is a priority for the SEC.  As hedge fund managers are subject to sanctions for retaliating against whistleblowers, it is important for managers to ensure that internal investigations are properly carried out and that internal reporting is properly incentivized.  See “Sanctions against Private Fund Manager for Retaliating against Whistleblower Highlight the Importance of Incentivizing Internal Reporting,” Hedge Fund Law Report, Vol. 7, No. 27 (Jul. 18, 2014).  Furthermore, with the addition in 2010 by the Dodd-Frank Act of Section 21F – the “Securities Whistleblower Incentives and Protection” provision – to the Securities and Exchange Act of 1934, and the SEC’s subsequent adoption of Rule 21F-17 to implement Section 21F’s whistleblower protections in 2011, hedge fund managers have been put on notice that the actual or threatened enforcement of confidentiality agreements could result in violations of the Rule.  On April 1, 2015, in connection with charges that KBR, Inc. violated Rule 21F-17, the SEC announced its “first enforcement action against a company for using improperly restrictive language in confidentiality agreements with the potential to stifle the whistleblowing process.”  In a guest article, Thomas K. Cauley, Jr., Courtney A. Rosen and William B. Bruce, of Sidley Austin, analyze the SEC enforcement action against KBR and recommend how hedge fund managers and other entities can tailor their confidentiality agreements to avoid violating Rule 21F-17(a), while at the same time preserving attorney-client privilege during internal investigations.  For more on whistleblowers, see “RCA Session Offers Insights on Dodd-Frank Whistleblower Regime, Incentives, Anti-Retaliation Protections and Risks,” Hedge Fund Law Report, Vol. 8, No. 14 (Apr. 9, 2015).  For additional insight from Cauley and Rosen, see “Rules Against ‘Spoofing’ and Other Disruptive Trading in Futures, Swaps and Options,” Hedge Fund Law Report, Vol. 7, No. 42 (Nov. 6, 2014); “Derivative Actions and Books and Records Demands Involving Hedge Funds,” Hedge Fund Law Report, Vol. 7, No. 39 (Oct. 17, 2014); and “Contractual Provisions That Matter in Litigation between a Fund Manager and an Investor,” Hedge Fund Law Report, Vol. 7, No. 37 (Oct. 2, 2014).