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.