Whistleblowers have been cleaning up since the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 allowed the Securities and Exchange Commission to reward them for information leading to enforcement. With a whopping $14 million awarded to one last year, there’s good reason for employees to come forward. And now, the SEC is warning in-house counsel against whistleblower contracts, which guard against these complaints by keeping them in the company, according to Christopher Varano of Fox Rothschild.

Varano says the SEC’s whistleblower chief, Sean McKessy, warned corporate counsel against drafting contracts that provide financial incentives to company whistleblowers for not bringing the information to the SEC. “If you’re spending a lot of your time trying to come up with creative ways to get people out of our programs, I think you’re spending a lot of wasted time and you run the risk of running afoul of our regulations,” McKessy said.

McKessy also warned lawyers that the SEC will come after not only the companies, but the individuals who drafted such provisions. “We have the powers to eliminate the ability of lawyers to practice before the commission,” he threatened. “General counsel and securities compliance attorneys should be cautious when drafting employment contracts to avoid including language that could be interpreted to offer incentives for employees to keep potential securities fraud whistleblower complaints in-house,” says Varano.

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