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

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.

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