In re AppFolio

UNITED STATES OF AMERICA 
Before the 
SECURITIES AND EXCHANGE COMMISSION 
 
SECURITIES EXCHANGE ACT OF 1934 
Release No. 100971 / September 9, 2024 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-22080 
 
In the Matter of 
 
 
AppFolio, 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 AppFolio, Inc. (“AppFolio” or “Respondent”).  
 
II. 
 
 In anticipation of the institution of these proceedings, AppFolio 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, AppFolio 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 AppFolio’s Offer, the Commission finds that: 
 
Respondent 
 
1. AppFolio, a Delaware corporation based in Santa Barbara, California, provides 
cloud-based property management software for the real estate industry. AppFolio’s common stock 

 2 
is registered with the Commission pursuant to Section 12(b) of the Exchange Act and is listed on 
the Nasdaq Stock Market under the ticker “APPF.” 
 
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).  
 
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.  AppFolio’s Employment, Settlement, and Consulting Services Agreements 
 
4. As a regular part of its business, AppFolio enters into employment agreements with 
employees and consulting services agreements with independent contractors. These agreements 
define the rights and responsibilities of the employee or contractor during their working 
relationship with the company and after their departure.  
 
5. From time to time, AppFolio enters into settlement agreements with former 
employees. These settlement agreements are contracts that resolve an actual or potential legal 
dispute between the company and the former employee. 
 
6. On September 15, 2021, and February 8, 2023, AppFolio entered into two 
employment agreements that required employees to waive their right to recover a monetary award 
for participating in an investigation by a government agency. Specifically, each of these 
agreements required the employee to execute a general release following the end of their 
employment that, while expressly permitting participation in government whistleblower programs, 
also required the employee to waive their right to a potential award. These general releases stated: 
 
I agree that I hereby waive all rights to sue or obtain equitable, remedial or punitive 
relief  from any  or  all  Released  Parties  of  any  kind  whatsoever  in  respect  of  any 

 3 
Claim,  including,  without  limitation, reinstatement,  back  pay,  front  pay,  and  any 
form  of  injunctive  relief.  Notwithstanding  the  above,  I  further acknowledge  that  I 
am not waiving and am not being required to waive any right that cannot be waived 
under law,  including  the  right  to  file  an  administrative  charge  or  participate  in  an 
administrative  investigation  or proceeding; provided, however,  that  I  disclaim 
and  waive  any  right  to  share  or  participate  in  any  monetary  award  resulting 
from the prosecution of such charge or investigation or proceeding.  
 
(Underline in original. Emphasis added.) 
 
7. On February 28, 2022, AppFolio entered into one settlement agreement that, while 
expressly permitting a former employee to participate in government whistleblower programs, 
required him to waive his right to recover a potential monetary award. The agreement stated: 
 
Excluded from this waiver and release is any claim  or right that cannot be waived 
by law, including all claims arising after the date of this Agreement and the right to 
file a charge with or participate in an investigation conducted by an administrative 
agency,  including  but  not limited  to,  claims  for  worker’s  compensation  and 
unemployment  insurance  benefits. However, [employee] is  releasing  his  right  to 
recover  any  monetary  or  non-monetary  relief  (including  but  not  limited  to 
compensatory,  liquidated,  or punitive damages, attorney’s  fees  or  costs)  in 
connection with a charge and/or investigation filed or initiated by him, another 
individual,  group  of  individuals,  with  any  federal  or  state  agency,  for  any 
claim  or  cause  of  action  of  any  type  arising  at  any  time  prior  to  the  effective 
date of this Agreement. 
 
(Emphasis added.) 
 
8. Between January 23, 2020, and October 17, 2023, AppFolio entered into sixty-eight 
consulting services agreements that prohibited contractors from voluntarily providing information 
about AppFolio’s business operations to government agencies and required that contractors notify 
AppFolio of any legally compelled disclosure of such information. The precise text of these 
provisions varied, but they were all substantially similar to the following example: 
 
Nothing in this Agreement shall be construed to prevent disclosure of Confidential 
information as may be required by applicable  law or regulation, or pursuant to the 
valid  order  of  a  court  of  competent  jurisdiction  or  an  authorized  government 
agency, provided  that  the  disclosure  does  not  exceed  the  extent  of  disclosure 
required  by  such  law,  regulation,  or  order  Contractor  agrees  to  provide 
written  notice  of  any  such  order  to  an  authorized  offer  of  AppFolio  within  2 
business days of receiving such order, but in any event sufficiently in advance 
of  making  any  disclosure  to  permit  AppFolio  to  contest  the  order  or  seek 
confidentiality protections, as determined in AppFolio’s sole discretion. 
 
(Emphasis added.) 

 4 
 
9. Although the Commission is unaware of any instances in which AppFolio took 
action to enforce these provisions or in which the affected individuals declined to speak with the 
Commission staff about potential violations of securities laws, these provisions created 
impediments to participation in the Commission’s whistleblower program by requiring individuals 
to forego their right to voluntarily provide information to the Commission staff or the financial 
award they might receive for doing so.  
10. Through the conduct described above, AppFolio 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. 
 
Remedial Actions and Cooperation 
 
11. After being contacted by the Commission staff in connection with this matter, 
AppFolio revised its internal agreement templates, adding language affirmatively advising 
employees and contractors that they are not prohibited from disclosing information to any 
government agency or collecting any related incentive awards. AppFolio also used reasonable 
efforts to notify the affected individuals that their 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. 
 
12. In determining to accept the Offer, the Commission considered remedial acts 
promptly undertaken by AppFolio and cooperation afforded to the Commission staff. 
 
IV. 
 
 In view of the foregoing, the Commission deems it appropriate to impose the sanctions 
agreed to in AppFolio’s Offer. 
 
 Accordingly, it is hereby ORDERED that: 
 
 A. Pursuant to Section 21C of the Exchange Act, AppFolio cease and desist from 
committing or causing any violations and any future violations of Exchange Act Rule 21F-17(a). 
 
B. AppFolio shall, within ten days of the entry of this Order, pay a civil money penalty 
in the amount of $692,250 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). 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  

 5 
 
(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 
AppFolio 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. 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. 100971 / September 9, 2024 

 

ADMINISTRATIVE PROCEEDING 

File No. 3-22080 

 

In the Matter of 

 

 

AppFolio, 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 AppFolio, Inc. (“AppFolio” or “Respondent”).  

 

II. 

 

 In anticipation of the institution of these proceedings, AppFolio 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, AppFolio 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 AppFolio’s Offer, the Commission finds that: 

 

Respondent 

 

1. AppFolio, a Delaware corporation based in Santa Barbara, California, provides 

cloud-based property management software for the real estate industry. AppFolio’s common stock 



 2 

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

the Nasdaq Stock Market under the ticker “APPF.” 

 

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).  

 

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.  AppFolio’s Employment, Settlement, and Consulting Services Agreements 

 

4. As a regular part of its business, AppFolio enters into employment agreements with 

employees and consulting services agreements with independent contractors. These agreements 

define the rights and responsibilities of the employee or contractor during their working 

relationship with the company and after their departure.  

 

5. From time to time, AppFolio enters into settlement agreements with former 

employees. These settlement agreements are contracts that resolve an actual or potential legal 

dispute between the company and the former employee. 

 

6. On September 15, 2021, and February 8, 2023, AppFolio entered into two 

employment agreements that required employees to waive their right to recover a monetary award 

for participating in an investigation by a government agency. Specifically, each of these 

agreements required the employee to execute a general release following the end of their 

employment that, while expressly permitting participation in government whistleblower programs, 

also required the employee to waive their right to a potential award. These general releases stated: 

 

I agree that I hereby waive all rights to sue or obtain equitable, remedial or punitive 

relief from any or all Released Parties of any kind whatsoever in respect of any 



 3 

Claim, including, without limitation, reinstatement, back pay, front pay, and any 

form of injunctive relief. Notwithstanding the above, I further acknowledge that I 

am not waiving and am not being required to waive any right that cannot be waived 

under law, including the right to file an administrative charge or participate in an 

administrative investigation or proceeding; provided, however, that I disclaim 

and waive any right to share or participate in any monetary award resulting 

from the prosecution of such charge or investigation or proceeding.  

 

(Underline in original. Emphasis added.) 

 

7. On February 28, 2022, AppFolio entered into one settlement agreement that, while 

expressly permitting a former employee to participate in government whistleblower programs, 

required him to waive his right to recover a potential monetary award. The agreement stated: 

 

Excluded from this waiver and release is any claim or right that cannot be waived 

by law, including all claims arising after the date of this Agreement and the right to 

file a charge with or participate in an investigation conducted by an administrative 

agency, including but not limited to, claims for worker’s compensation and 

unemployment insurance benefits. However, [employee] is releasing his right to 

recover any monetary or non-monetary relief (including but not limited to 

compensatory, liquidated, or punitive damages, attorney’s fees or costs) in 

connection with a charge and/or investigation filed or initiated by him, another 

individual, group of individuals, with any federal or state agency, for any 

claim or cause of action of any type arising at any time prior to the effective 

date of this Agreement. 

 

(Emphasis added.) 

 

8. Between January 23, 2020, and October 17, 2023, AppFolio entered into sixty-eight 

consulting services agreements that prohibited contractors from voluntarily providing information 

about AppFolio’s business operations to government agencies and required that contractors notify 

AppFolio of any legally compelled disclosure of such information. The precise text of these 

provisions varied, but they were all substantially similar to the following example: 

 

Nothing in this Agreement shall be construed to prevent disclosure of Confidential 

information as may be required by applicable law or regulation, or pursuant to the 

valid order of a court of competent jurisdiction or an authorized government 

agency, provided that the disclosure does not exceed the extent of disclosure 

required by such law, regulation, or order Contractor agrees to provide 

written notice of any such order to an authorized offer of AppFolio within 2 

business days of receiving such order, but in any event sufficiently in advance 

of making any disclosure to permit AppFolio to contest the order or seek 

confidentiality protections, as determined in AppFolio’s sole discretion. 

 

(Emphasis added.) 



 4 

 

9. Although the Commission is unaware of any instances in which AppFolio took 

action to enforce these provisions or in which the affected individuals declined to speak with the 

Commission staff about potential violations of securities laws, these provisions created 

impediments to participation in the Commission’s whistleblower program by requiring individuals 

to forego their right to voluntarily provide information to the Commission staff or the financial 

award they might receive for doing so.  

10. Through the conduct described above, AppFolio 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. 

 

Remedial Actions and Cooperation 

 

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

AppFolio revised its internal agreement templates, adding language affirmatively advising 

employees and contractors that they are not prohibited from disclosing information to any 

government agency or collecting any related incentive awards. AppFolio also used reasonable 

efforts to notify the affected individuals that their 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. 

 

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

promptly undertaken by AppFolio and cooperation afforded to the Commission staff. 

 

IV. 

 

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

agreed to in AppFolio’s Offer. 

 

 Accordingly, it is hereby ORDERED that: 

 

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

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

 

B. AppFolio shall, within ten days of the entry of this Order, pay a civil money penalty 

in the amount of $692,250 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). 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  

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


 5 

 

(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 

AppFolio 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. 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.