Two SEC whistleblowers received a $50-million award for their role in exposing misconduct by JPMorgan Chase. The financial institution allegedly concealed information about conflicts of interest from its customers. This resulted in a $307 million settlement with the agency, which enabled the tipsters to receive $37 million and $13 million in whistleblower awards respectively.
Both whistleblowers have remained anonymous, as it is customary with individuals exposing fraud by financial institutions. It became known, however, that one of the tipsters (the one who received the $13 million reward) was once a high-ranking JP Morgan executive. It is not known whether he or she is still employed by the bank.
Financial institutions failing to disclose conflicts of interest to their wealth management customers is nothing new. The SEC whistleblower program has repeatedly succeeded in exposing this type of misconduct through the promise of anonymity, anti-retaliation protections, and sizable rewards for insiders willing to speak out.
2018 was a particularly productive year for the program, as it saw the number of tips about misconduct increase by 18 percent. The total number of tips received last year surpassed 5,280, about twice as many as during the first year of the program.
According to the whistleblower allegations in the case against JP Morgan, the bank routinely invested its customers’ money in its own mutual funds/hedge funds, without sharing that information with them, and often disregarding their best interests.
When the SEC announced the settlement, a spokesperson for the agency’s Office of the Whistleblower commented, “These awards show how critically important whistleblowers can be to the agency’s investigation and ability to bring a case to successful and efficient resolution.”
As the SEC, which has limited resources to investigate fraud, keeps receiving more and more tips every year, it appears to be focusing only on the most solid cases. Thus, would-be tipsters must now work more efficiently with experienced whistleblower attorneys to gather evidence and build a promising case.
Lately, whistleblowers have complained that it is taking the SEC too long to decide whether the information they provided merits a reward. Over four years, it took the agency an average two years, or longer, to make award determinations. Recently, a whistleblower who allegedly helped the SEC recover $519 million from Teva Pharmaceutical Industries in 2016 decided to file a petition in court arguing that the agency was taking too long to decide. Under Dodd-Frank, the tipster, who blew the whistle on foreign corruption, could receive over $51 million.
The $50 million payout in the case against JP Morgan was the third largest whistleblower award granted by the SEC over the last year.
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