1st – Ever Whistleblower Retaliation Case Brought by SEC

In the first-of-its-kind enforcement action, The Securities and Exchange Commission accused a hedge fund adviser, Paradigm Capital Management, Inc. and its owner Candace King Weir, of squashing a top trader after learning that he reported trade violations at the firm.

Paradigm had failed to meet their obligations to obtain client’s consent prior to conducting trades. The firm created a conflicts committee that reviewed and approved transactions on behalf of fund clients. The SEC concluded that the committee could not be deemed independent and thus created a conflict of interest.

The whistleblower had been the head trader at the firm until the firm found that he alleged violations. At that point, he was stripped of his title, pushed to lower positions, and eventually forced to resign. The decision in this case sought to make it clear that retaliation, in any form, is unacceptable. Paradigm did not admit or deny any wrongdoing but agreed to pay approximately $2.2 million in sanctions to settle the retaliation charges and related trading violations.

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