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Jordan A. Thomas: Welcome to the whistleblower revolution

Secrets. We all have them. It’s human nature to keep them. But given recent enforcement actions initiated by whistleblowers, one thing is clear: a good secret has a high price tag.

When we launched the nation’s first practice focused exclusively on representing SEC whistleblowers, our refrain was constant. With the robust incentives and protections provided by its whistleblower program, the SEC effectively deputized everyone to be its eyes and ears.  We called the program a game changer that would revolutionize the enforcement paradigm.

Welcome to the revolution.

Last month, the SEC announced the largest case against an investment advisor ever, in which our whistleblower client tipped the SEC on JP Morgan’s failure to disclose conflicts of interest to its wealth management clients. Two of the bank’s wealth management subsidiaries agreed to pay $267 million and admit wrongdoing to settle the SEC charges and paid another $40 million fine to the CFTC in a parallel proceeding.

While the amount of the whistleblower award won’t be announced for some time, the implication of this one matter is powerful: When the long arm of law enforcement, emboldened by a whistleblower tip, reaches into one of the largest and most storied financial institutions in the world, there isn’t a secret scheme in the world that’s insulated from detection.

What’s more, this revolution is just beginning. And the good guys are winning. 

As companies work hard to skirt transparency — our recent survey found that 25 percent of financial services professionals earning over $500,000 annually have signed or have been asked to sign an agreement that prohibits reporting potential illegal or unethical conduct to law enforcement — the SEC is fighting back. In April of last year, the agency announced its first enforcement action against a company for using improperly restrictive language in confidentiality agreements, which could stifle truthtellers.

Nevertheless, the volume of whistleblower submissions continues to climb, up by more than 30 percent since FY2012. As the enforcement actions get more significant and the awards grow larger, the corrosive schemes of bad actors will be harder and harder to keep under the radar.

This is absolutely the case with violations of the FCPA, which continue to be an enforcement priority for federal law enforcement. At the ACI International Conference last November, Kara Brockmeyer, Chief of the SEC’s FCPA Unit, specifically noted that whistleblowers are an increasingly significant source for FCPA investigations, generating 150 FCPA-related reports this year.

In my two decades of work exposing securities violations, I know there are always witnesses. The more complex the fraud, the more eyes and ears involved. Fortunately for the good guys and the integrity of the markets at large, exposing institutional secrets and reporting violations of the law is finally a safe bet.

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Jordan A. Thomas, pictured above, is the Chair of the Whistleblower Representation Practice at Labaton Sucharow. He served as an assistant director and, previously, as an assistant chief litigation counsel in the Division of Enforcement at the U.S. Securities and Exchange Commission. He had a leadership role in the development of the SEC Whistleblower Program. Follow him on Twitter at @SECReporter.

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1 Comment

  1. I very much doubt that defining this as a revolution is an accurate portrayal. For every whistleblower that manages to gain an award or even just respect, there are hundreds if not thousands that have had their lives and careers destroyed …..and the financial environment is weakened as a result of their loss from the business world. Sorry to sound so skeptical, but this is the reality.


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