SEC Brings First Anti-Retaliation Enforcement Action under Dodd-Frank

19 June 2014
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  • This week, the SEC brought its first case under the whistleblower anti-retaliation provision of Dodd-Frank, alleging that an investment adviser and its owner engaged in prohibited principal transactions and then retaliated against an employee who reported the prohibited principal transactions at the firm to the SEC. Both the investment adviser and its owner, settled with the SEC, without admitting or denying wrongdoing, agreeing to pay $2.2 million. The settlement leaves open the question of what portion of that sanction was attributed to the retaliation claim as opposed to the principal trading violations.
  • According to the SEC Order, after learning that the whistleblower had reported the firm’s wrongdoing to the SEC, the investment adviser relieved the individual of his day-to-day responsibilities as head trader, including his supervisory responsibilities. The investment adviser also allegedly forced the Whistleblower to investigate the conduct he had reported to the SEC, and otherwise marginalized him at the office.
  • This SEC action is the latest example of the Commission taking a broad reading of the Dodd-Frank whistleblower and anti-retaliation provisions and making enforcement of those provisions a priority. As this action and other statements by SEC officials make clear, employers should not seek to retaliate against any employee that they learn has engaged in protected whistleblowing activity. Importantly, retaliation can take many forms and simply continuing to compensate an employee at his or her pre-whistleblowing level will not inoculate an employer from anti-retaliation charges.