On September 29, 2016, the SEC announced settlement of an enforcement action against International Game Technology (IGT) for retaliation against a whistleblower. It is the first SEC action to assert stand-alone charges for whistleblower retaliation, without also including charges for or a settlement of a violation of securities laws.

The action comes under the whistleblower employment anti-retaliation provisions in Section 21F of the Exchange Act, which was added by the Dodd-Frank Act. The provisions state that no employer may discharge, demote, suspend, threaten, harass, or otherwise discriminate against a whistleblower in response to a lawful act of whistleblowing (15 U.S.C. § 78u-6(h)).

The SEC noted that, after the whistleblower raised concerns about IGT's accounting methodology, IGT conducted an internal investigation of the whistleblower's concerns and concluded that the company's accounting was appropriate. However, during the course of the investigation, IGT denied certain employment opportunities to the whistleblower, and fired the whistleblower after the investigation had concluded.

The SEC did not bring any claims against IGT related to the whistleblower's accounting concerns, instead focusing exclusively on IGT's retaliation against the whistleblower for raising concerns with IGT regarding its accounting.

IGT has agreed to pay a $500,000 penalty to settle the SEC enforcement action.

This is the first time the SEC has brought an enforcement action solely for retaliation against a whistleblower since Dodd Frank was passed in 2011. The SEC brought charges for retaliation only once before, in a 2014 enforcement action against Paradigm Capital Management. However, the SEC charged Paradigm with both engaging in prohibited principal transactions with an affiliated broker-dealer as well as retaliation against a whistleblower who reported the transactions to the SEC. Paradigm settled the case for $2.2 million (see In the Matter of Paradigm Capital Management, Inc. and Candace King Weir, Exchange Act Release No. 72393 (June 16, 2014)).

The IGT action and settlement demonstrate the seriousness with which the SEC treats retaliation against whistleblowers even when no violations of securities laws are alleged.

For more information about corporate whistleblowing and retaliation, see Practice Note, Whistleblower Protections Under Sarbanes-Oxley and the Dodd-Frank Act.