Risk & Compliance

SEC Awards $600K In Whistleblower Retaliation Case

A hedge fund agreed to settle charges that it retaliated against a trader who reported securities law violations.
Matthew HellerApril 29, 2015

A former trader for a hedge fund has been awarded more than $600,000 for providing key information that led to the U.S. Securities and Exchange Commission’s first anti-retaliation enforcement action.

Paradigm Capital Management and owner Candace King Weir agreed in June to pay $2.2 million to settle SEC charges that the firm illegally failed to report conflicts in its trades and then retaliated against the trader for reporting the securities law violations to the SEC.

It was the first case brought by the SEC under its new Dodd-Frank Act authority to protect whistleblowers against retaliation by employers.

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According to the SEC, the whistleblower “suffered unique hardships, including retaliation, as a result of reporting to the commission” and will receive the maximum award of 30% of the sanctions imposed on Paradigm Capital.

The SEC did not name the whistleblower but in September 2012, James Nordgaard sued Paradigm for retaliation. The suit identified him as a head trader.

“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,” Andrew Ceresney, director of the SEC’s Division of Enforcement, said in a news release. “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, said he hoped the award would encourage “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.”

To date, the SEC has awarded more than $50 million to 17 whistleblowers since its whistleblower program began more than three years ago.

Paradigm was accused of failing to report conflicts that arose out of a trading strategy aimed at reducing the tax liability of investors in a hedge fund affiliated with the firm. It settled the case without admitting or denying the charges.