Paradigm Capital Management and Candace King Weir will pay $2.2 million to settle allegations that Ms. Weir’s company violated the securities laws, including retaliating against an employee who brought information to the SEC.

According to the allegations, Ms. Weir arranged for trades between Paradigm Capital Management and C.L. King, another company she owned, in order to reduce the tax liabilities of a hedge fund affiliated with and managed by Paradigm. Because Ms. Weir was participating in both sides of the trade, Paradigm was required to disclose the conflict in writing to the hedge fund and obtain its consent. According to the SEC, however, Paradigm created a Conflicts Committee that itself was conflicted–the Paradigm CFO that sat on the committee was also the CFO of C.L. King–to approve the transactions, rendering the disclosure and consent ineffective. An employee disclosed this alleged conduct to the SEC and, upon Paradigm’s being made aware of the employee’s report, was allegedly stripped of his duties, in violation of Dodd-Frank whistleblower protections.

This is the first case settled under the SEC’s anti-retaliation, whistleblower protection provisions. Additionally, although several whistleblower awards have been announced by the SEC, this settlement is the first enforcement action to be publicly attributed to the SEC’s whistleblower program.

Read the entire press release, “SEC Charges Hedge Fund Adviser With Conducting Conflicted Transactions and Retaliating Against Whistleblower”
Read the SEC order