Securities and Exchange Commission Announced Whistleblower Awards

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The Securities and Exchange Commission (SEC) announced at the end of March that it would be awarding two whistleblowers a total of $50 million for providing information that help the agency in the enforcement of its regulations. One of the recipients is due to receive $37 million, while the other will receive $13 million.

The first award is the third-largest to date following a $50 million award in March 2018 to two whistleblowers and more than $39 million awarded in September 2018. 

This latest award is the result of two JP Morgan executives reporting a tip concerning securities violations to the SEC.

According to the tipsters, JP Morgan Securities and JPMorgan Chase Bank advisors failed to properly disclose the conflict of interest before investing client money in JPMorgan hedge funds and mutual funds. Following an SEC investigation into the matter that included whistleblower cooperation, it was revealed that some of the funds produced less revenue than other investments.

As a result of the investigation, both JP Morgan entities agreed to pay $267 million to the SEC in December 2015. The settlement was one of the largest initiated in the program’s history.

According to Jane Norberg, chief of the SEC’s Office of the Whistleblower, people like the JP Morgan whistleblowers are providing information that can be indispensable in identifying unethical and corrupt actions in the financial industry and the awards given to them “…show how critically important whistleblowers can be to the agency’s investigation” and recovering money that should have never been lost by investors.

SEC Whistleblower Program Continues Its Battle against Fraud

Since the program began in 2012, the SEC whistleblowers have been awarded more than $375 million. Sixty-one people have received awards paid out of the investor protection fund established by Congress.

A portion of the recovery money is paid into the fund after the investigation is conducted and wrongdoing is identified. Money is first paid to investors and other individuals who might have been harmed by the actions of the wrongdoer before money is distributed to the whistleblowers. Distribution to these individuals is the first priority of the SEC and money is never withheld from individuals who were harmed by unethical acts reported to the SEC.

To qualify for an award, an individual or group must voluntarily come forward and provide to the SEC information that is original, timely, and credible, and that results in the successful recovery of money.

Typically, awards given to whistleblowers range from 10 to 30 percent of the money recovered after the investigation, provided the recovery is in excess of $1 million.

Whistleblower Protection

The identity of whistleblowers is protected by the SEC and anything that could lead to the identification of a whistleblower is undisclosed. This protection is stipulated by the Dodd-Frank Act.

In addition to identity protection and establishing a reward system for whistleblowers, Dodd-Frank also prohibits retaliation by employers against whistleblowers and provides them with a private cause of action should retaliation in the form of discharge or discrimination occur.

Some whistleblowers choose to reveal their identities and some have even gone on to be advocates of ethics and professional conduct within their specific industry or advocates of the whistleblower program.