The SEC Monday charged hedge-fund advisory firm Paradigm Capital Management with retaliating against an employee who reported alleged misconduct to the agency.
It was the SEC’s first anti-retaliation enforcement action under the 2010 Dodd-Frank Act.
Albany, New York-based Paradigm and its owner Candace King Weir agreed to pay $2.2 million to settle the SEC’s civil charges without admitting or denying wrongdoing.
The SEC alleged that Paradigm and King engaged in prohibited principal transactions and then retaliated against the former head trader who reported the transactions to the SEC.
After Paradigm found out the trader had talked to the SEC, it demoted him from head trader to compliance assistant, the SEC said.
“Paradigm retaliated against an employee who reported potentially illegal activity to the SEC,” Andrew Ceresney, director of the SEC’s enforcement division, said.
“Those who might consider punishing whistleblowers should realize that such retaliation, in any form, is unacceptable.”
Under Dodd-Frank, the SEC can award whistleblowers up to 30% of the amount recovered through an SEC enforcement action.
“The agency didn’t name the tipster, but a person familiar with the matter identified him as James Nordgaard, the firm’s former head trader who in 2012 brought his own civil suit against Paradigm with similar allegations of retaliation. That suit was eventually withdrawn,” the Wall Street Journal reported Monday.
Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.