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SEC’s enforcement action against hedge fund adviser for retaliation against a whistleblower highlights challenges employers face

Bryan B. House (Partner based at Foley & Lardner LLP, Milwaukee, Wisconsin, USA)
Pam L. Johnston (Partner based at Foley & Lardner LLP, Los Angeles, California, USA)
Courtney Worcester (Courtney Worcester is a Partner based at Foley & Lardner LLP, Boston, Massachusetts, USA.)

Journal of Investment Compliance

ISSN: 1528-5812

Article publication date: 28 October 2014

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Abstract

Purpose

To explain a recent enforcement action by the USA Securities and Exchange Commission (SEC) whereby the SEC brought its first enforcement action for retaliation against a whistleblower under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank).

Design/methodology/approach

Explains the SEC’s recent enforcement action under Dodd-Frank, highlighting the efforts that a company undertook with respect to continuing to employ a whistleblower after potentially fraudulent activity was reported and discusses practical problems faced by such companies when trying to simultaneously investigate potential wrong-doing without being seen as retaliating against a whistleblower.

Findings

Through this enforcement action, the SEC has demonstrated a willingness to bring cases to enforce Dodd-Frank’s anti-retaliation provisions even though Dodd-Frank does not expressly grant it such enforcement authority.

Practical implications

Companies must have a strong culture of compliance and a strong policy encouraging whistleblowers to report concerns internally if at all possible. Once the whistleblower has reported to the SEC, a company will need to maintain the status quo with respect to the whistleblower.

Originality/value

Practical guidance from attorneys with experience with the SEC and whistleblower actions.

Keywords

Acknowledgements

© 2014 Foley & Lardner

Disclaimer. This article is intended to provide information (not advice) about important new legislation or legal developments. The great number of legal developments does not permit the issuing of an update for each one, nor does it allow the issuing of a follow-up on all subsequent developments.

Citation

B. House, B., L. Johnston, P. and Worcester, C. (2014), "SEC’s enforcement action against hedge fund adviser for retaliation against a whistleblower highlights challenges employers face", Journal of Investment Compliance, Vol. 15 No. 4, pp. 7-10. https://doi.org/10.1108/JOIC-08-2014-0031

Publisher

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Emerald Group Publishing Limited

Copyright © 2014, Authors