Jenner & Block

Client Alert: SEC Brings First Whistleblower Retaliation Case

On June 16, 2014, the Securities and Exchange Commission (SEC) brought its first case charging illegal retaliation against a Dodd-Frank whistleblower.  Paradigm, a hedge fund advisory firm, and its owner agreed to settle the SEC’s claim in an administrative action in which the SEC found that they engaged in prohibited principal transactions with an affiliated broker-dealer and that Paradigm had then retaliated against the head trader who had reported the trading to the SEC.  Partner Christian R. Bartholomew and Associate J. Douglas Wilson note that the SEC can and will take harsh action against those it perceives have retaliated against whistleblowers and retaliatory conduct is highly fact specific, and judgments about what is and what is not appropriate disciplinary action are particularly difficult where a culpable whistleblower is involved.