April 30, 2015

SEC Announces First Award to Whistleblower in Retaliation Case

By the C|C Whistleblower Lawyer Team

The SEC awarded $600,000 to a whistleblower who suffered “unique hardships, including retaliation” as a result of blowing the whistle on misconduct at hedge fund advisory firm Paradigm Capital Management.  The award is the maximum the SEC pays to whistleblowers – 30 percent of the amount the SEC recovers – and represents the first time the SEC has made an award to a whistleblower in a retaliation case, continuing its roll of awards that are firsts of their kind.

The case is In the Matter of Paradigm Capital Management, Inc. and Candace King Weir, File No. 3-15930, in which the SEC charged Paradigm and its owner, Candace King Weir, with retaliating against the whistleblower, a trader at the firm, after it learned that the trader reported potential prohibited transactions and other misconduct to the SEC.  Some of the retaliation actions Paradigm engaged in included removing the whistleblower from the whistleblower’s position, tasking the whistleblower with investigating the very conduct the whistleblower reported to the SEC, changing the whistleblower’s job function, stripping the whistleblower of supervisory responsibilities, and otherwise marginalizing the whistleblower. Andrew Ceresney, Director of the SEC’s Division of Enforcement, stated “we appreciate and recognize the sacrifice this whistleblower made and the important role the whistleblower played in the success of the SEC’s first anti-retaliation enforcement action…the Enforcement Division is committed to taking action when appropriate against companies and individuals that retaliate against whistleblowers.”

Sean McKessy, Chief of the SEC’s Office of the Whistleblower, had similar sentiments, adding “my hope is that the award today encourages potential whistleblowers to come forward in light of our demonstrated commitment to protect them against retaliatory conduct and make significant financial awards to whistleblowers who suffer employment hardships as a result of reporting possible securities law violations.”

Along with this award, the SEC has made a number of awards that are firsts of their kind in the past year, including two awards totaling $1.3 million to company compliance officers turned whistleblowers and one award between $475,000 and $575,000 to a former company officer who learned of the fraud through another employee rather than firsthand.  With these less traditional awards, the SEC is demonstrating its continued commitment to protecting whistleblowers from retaliatory conduct and to reward them when they report securities violations to the SEC.


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