The US Securities and Exchange Commission (SEC) Whistleblower program is set to make its largest payout to date. Two individuals are poised to earn an award of $61 million for their role in tipping off the regulator to a recent JPMorgan nondisclosure – the sum easily surpasses the previous record of $30 million set back in 2014.
The award centered on JPMorgan’s lapse in disclosure. It failed to inform wealthy clients that it was nudging them towards investment instruments that would ultimately have reaped the greatest profits for the bank. Consequently, JPMorgan forked over $307 million to both the SEC and the US Commodity Futures Trading Commission (CFTC), according to a Bloomberg report.
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On its part, JPMorgan fully admitted its disclosure failures that took place over a five-year period between 2008 to 2013. This entailed its securities subsidiary and its nationally chartered bank, according to regulatory filings. Despite the settlement, the US bank noted that its failure to properly disclose information to investors was unintentional.
JPMorgan paid a fine of $267 million to the SEC, with $40 million going to the CFTC. One of the SEC’s whistleblowers was entitled to 18 percent of the SEC portion while the other took 5 percent, or $48 million and $13 million respectively.
The range for whistleblower awards varies between 10 and 30 percent of the money collected. $61 million corresponds to roughly 23 percent of the initial fine. While the CFTC has not made any whistleblower awards, both regulators run sovereign programs. The individual who just collected $48 million has also applied to the CFTC program, though the CFTC shot down any prospect of a ‘double-recovery’ in terms of awards.
The programs each have their roots back in the 2010 Dodd-Frank Act – the whistleblower program was originally established by Congress to help incentivize whistleblowers to provide specific, timely and credible information about federal securities law violations.