A Retaliation Case Against Hedge-fund Advisory Firm. The Securities and Exchange Commission (SEC) has awarded a whistleblower “over $600,000” in a retaliation case against hedge-fund advisory firm Paradigm Capital Management Inc. Wall Street Journal reports that the money was a 30 percent cut from the penalty Paradigm had to pay the SEC; it is the first time the agency has distributed part of a penalty to a tipster.
Last year, the SEC charged Paradigm with engaging in prohibited principal transactions and for retaliating against an employee who reported the issue. The illegal transactions were attributed to owner Candace King Weir, who agreed to pay $2.2 million to settle the allegations without admitting wrongdoing. The whistleblower was awarded the maximum 30 percent allowed by the program.
The whistleblower submitted a tip of Paradigm’s alleged wrongdoing.
According to the SEC, the whistleblower submitted a tip of Paradigm’s alleged wrongdoing in March 2012. The tipster said that while the company was trading on behalf of hedge-fund client PCM Partners L.P. II, it engaged in prohibited principal transactions with affiliated broker-dealer C.L. King & Associates.
SEC says that the whistleblower informed Ms Weir that he reported the conduct to the SEC in July 2012. He subsequently had a change in job function, lost his supervisory responsibilities and tasked him to investigating the conduct he reported. The whistleblower later resigned.
Andrew Ceresney, the SEC’s enforcement director, said “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,” according to WSJ.