First SEC Whistleblower Retaliation Charge Is Filed

The SEC for the first time has exercised its new authority to bring anti-retaliation enforcement actions, collecting more than $2 million from a hedge fund and its owner. They were accused of retaliating against a whistleblower employee who tipped the SEC off to improper trading and was then demoted. Paradigm Capital Management Inc. and its owner Candace Weir agreed to settle, without admitting or denying the SEC’s findings, paying disgorgement of $1.7 million, prejudgmet interest of more than $180,000 and a civil penalty of $300,000. The whistleblower is eligible for a monetary award from the SEC as well. “We will continue to exercise our anti-retaliation authority in these and other types of situations where a whistleblower is wrongfully targeted for doing the right thing and reporting a possible securities law violation,” said Sean McKessy, Chief of the SEC’s Office of the Whistleblower. McKessy’s comments “signal an increased risk for public companies as the SEC looks for its next retaliation enforcement action,” Norton Rose Fulbright attorneys write in a client alert.