SEC Makes Largest Whistleblower Award To Date

The Securities Exchange Commission (“SEC”) is prepared to award two whistleblowers $61 million relating to a regulatory settlement with JPMorgan Chase.

A “preliminary determination” letter from the SEC claims-review staff detailing the award has been provided to several news organizations.

The highest previous whistleblower award from the SEC was $30 million in 2014.

In December 2015, the SEC announced that it had settled a regulatory investigation of JPMorgan Chase. The investigation centered on the failures of JPMorgan Securities and JPMorgan Chase Bank to properly disclose conflicts of interests to customers. Specifically, JPMorgan Chase failed to disclose to wealth customers its bias in selling proprietary mutual funds and hedge funds to clients.

Additionally, the firm did not disclose to clients that their mutual fund investments were being placed in a more expensive share class.

As part of the settlement, JPMorgan Chase paid a $267 million fine. The whistleblower award amounts to 23% of the fine.

One of the whistleblowers is to receive $48.1 million, equal to 18% of the fine. The second whistleblower is to receive $13.1, equal to 5% of the fine.

The SEC explains the disparity in the separate awards based on the fact that one of the whistleblowers did not report JPMorgan’s wrongdoing for over one year.

The SEC has also denied the whistleblower claims of four other individuals. The SEC claims staff did not feel that the information provided by these individuals substantially contributed to the resolution of the regulatory investigation.

JPMorgan Chase was also fined $40 million by the Commodities Futures Trading Commission (“CFTC”) in a related investigation. The whistleblower who is to receive $48.1 million has also filed a claim under the CFTC’s separate whistleblower program. The SEC staff, however, states in the letter that it did not think a separate award from the CFTC was appropriate since such a double recovery was not intended by Dodd – Frank, which authorizes the whistleblower program.

If you are aware of wrongdoing, unethical or illegal conduct on the part of your employer, and you need guidance on how to react or deal with that situation, contact the securities employment attorneys at Lubiner, Schmidt & Palumbo. We can assist you in determining the correct course of action, whether it be resignation, complaining to senior management or filing a whistleblower claim. We can assist you min determining the correct course of action, whether it be resignation, complaint to senior management or filing a whistleblower claim.