Memorandum
SEC Awards Maximum Allowable Whistleblower Payment In Its
First Case Involving Alleged Retaliation Against A Whistleblower
May 6, 2015

On April 28, 2015, the Securities and Exchange Commission (“SEC”) announced that it awarded themaximum allowable award to a whistleblower under the Dodd-Frank whistleblower program in its first caseinvolving alleged retaliation by an employer against an employee who reported suspected misconduct to theSEC.1 This award of 30 percent of the amount collected by the SEC in In the Matter of Paradigm CapitalManagement, Inc. and Candace King Weir equaled a payment of more than $600,000 to the employee who,according to the SEC, provided “key original information that led to the successful SEC enforcement action.”
In June 2014, the SEC instituted settled cease-and-desist proceedings against investment adviser Paradigm
Capital Management, Inc. and its majority owner, Candace King Weir, for allegedly taking “a series ofretaliatory actions that ultimately resulted in the whistleblower’s resignation” after learning that thewhistleblower had reported potential securities law violations to the SEC. 2 Paradigm’s alleged retaliatory
actions included:
 removing the whistleblower – Paradigm’s then-head trader – from Paradigm’s trading desk andtemporarily relieving him of his “day-to-day trading and supervisory responsibilities”;
 tasking the whistleblower with investigating the very actions he reported to the SEC;

1 Securities and Exchange Commission, “SEC Announces Award to Whistleblower in First Retaliation Case” (Apr. 28,2015); see also In the Matter of Paradigm Capital Management, Inc. and Candace King Weir, Release No. 34-72393,
File No. 3-15930 (June 16, 2014).

2 In the Matter of Paradigm Capital Management at 2.

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Memorandum – May 6, 20152 denying the whistleblower access to certain trading and account systems to which he previously hadaccess; denying the whistleblower access to his existing email account and redirecting his trading and email
accounts to another trader; and otherwise marginalizing the whistleblower.
The SEC found that Paradigm violated Section 922(h)(1)(A) of the Dodd-Frank Act, which provides thatemployers may not “discharge, demote, suspend, threaten [or] harass” employees who report suspected
misconduct to the SEC. The respondents agreed to pay disgorgement, prejudgment interest and a civil
penalty totaling $2.18 million to settle the charges. 3

Significance of the Award
The recent whistleblower award highlights the SEC’s continued focus on protecting whistleblowers fromretaliation. In connection with this award, Sean McKessy, Chief of the SEC’s Office of the Whistleblower,
expressed his hope it will encourage “potential whistleblowers to come forward in light of our demonstrated
commitment to protect them against retaliatory conduct and make significant financial awards towhistleblowers who suffer employment hardships as a result of reporting possible securities law violations.” 4Moreover, as noted by the Director of the SEC’s Division of Enforcement, Andrew Ceresney, the underlying
action demonstrates that the SEC’s Enforcement Division “is committed to taking action when appropriate
against companies and individuals that retaliate against whistleblowers.”
The award and the underlying enforcement action underscore the importance of implementing andmaintaining a well-designed, robust and effective program for reporting suspected misconduct throughinternal compliance channels and strong anti-retaliation policies.

3 The respondents also agreed to retain an Independent Compliance Consultant “to conduct a comprehensive review of

Paradigm’s supervisory, compliance, and other policies and procedures designed to prevent and detect prohibited
transactions” and to implement all the consultant’s recommendations.

4 “SEC Announces Award to Whistleblower in First Retaliation Case.”

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Memorandum – May 6, 2015

3If you have any questions or would like additional information, please do not hesitate to contact Yafit Cohn
at +1-212-455-3815 or yafit.cohn@stblaw.com, any other member of the Firm’s Public Company Advisory
Practice or any of the following members of the Firm’s Government and Internal Investigations Practice:

NEW YORK CITY

WASHINGTON, D.C.

Nicholas S. Goldin+1-212-455-3685
ngoldin@stblaw.com

Peter H. Bresnan+1-202-636-5569
pbresnan@stblaw.com

Joshua A. Levine+1-212-455-7694
jlevine@stblaw.com

Jeffrey H. Knox
+1-202-636-5532
jeffrey.knox@stblaw.com

Mark J. Stein+1-212-455-2310
mstein@stblaw.com

Cheryl J. Scarboro+1-202-636-5529
cscarboro@stblaw.com

The contents of this publication are for informational purposes only. Neither this publication nor the lawyers who authoredit are rendering legal or other professional advice or opinions on specific facts or matters, nor does the distribution of thispublication to any person constitute the establishment of an attorney-client relationship. Simpson Thacher & Bartlett LLP
assumes no liability in connection with the use of this publication. Please contact your relationship partner if we can be ofassistance regarding these important developments. The names and office locations of all of our partners, as well as ourrecent memoranda, can be obtained from our website, www.simpsonthacher.com.
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Memorandum – May 6, 2015

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