The Securities and Exchange Commission has sounded a warning to Wall Street and corporate America, taking aim at a hedge fund not only for improper trading - but for punishing the employee who blew the whistle on the wrongdoing.
The New York Times reports that on Monday, Paradigm Capital Management became the first investment fund to pay a fine for retaliating against an employee who reported his firm’s misdeeds to the S.E.C. The hedge fund, which manages $1.5bn of client money, agreed to pay $2.2m to settle the civil charges.
The charges stem from an accusation that Paradigm Capital’s owner, Candace King Weir, conducted improper transactions between Paradigm Capital and C.L. King & Associates, a broker-dealer that she owns, while trading on behalf of a hedge fund client, the S.E.C. said. And after Paradigm Capital learned that its head trader reported the wrongdoing to the S.E.C., the agency said, the firm 'engaged in a series of retaliatory actions', including stripping him of his title, 'that ultimately resulted in the head trader’s resignation'.
'Those who might consider punishing whistle-blowers should realize that such retaliation, in any form, is unacceptable', said Andrew J. Ceresney, director of the S.E.C.’s enforcement division.
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