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SEC awards three whistleblowers $83 million

The Securities and Exchange Commission made its biggest-ever whistleblower award Monday. It gave one person more than $33 million, and in the same case split nearly $50 million between two others.

The previous high for an SEC award to a single whistleblower was $30 million in 2014.

A statement emailed Monday to the FCPA Blog by Labaton Sucharow, a whistleblower law firm, said their clients (all three whistleblowers) tipped the SEC to long-running misconduct at Merrill Lynch.

The statement said Merrill Lynch over many years “executed complex options trades that lacked economic substance and artificially reduced the required deposit of customer cash in the reserve account.”

In June 2016, Merrill Lynch admitted wrongdoing and paid $415 million to settle charges that it misused customer cash to generate profits. The firm also failed to safeguard customer securities from the claims of its creditors.

Labaton Sucharow referred to the 2016 Merrill Lynch settlement in its statement Monday.

The two whistleblowers sharing the $50 million submitted their tips and claims to the SEC jointly. Based on their information, the SEC opened an investigation.

The SEC said Monday the two would have been awarded more money but they “unreasonably delayed” making their complaints.

The third whistleblower acted alone. He or she submitted new information that caused the SEC to open another investigation into Merrill Lynch.

A copy of the SEC’s redacted award order is here (pdf).

(By law, the SEC is required to protect the confidentiality of whistleblowers and doesn’t disclose information that might reveal their identity.)

Jane Norberg, chief of the SEC’s Office of the Whistleblower, said Monday: “We hope that these awards encourage others with specific, high-quality information regarding securities laws violations to step forward and report it to the SEC.”

The SEC has now awarded more than $262 million to 53 whistleblowers since its first award in 2012.

Awards are paid out of penalties the SEC collects from securities law violators.

Whistleblowers can be eligible for an award when they voluntarily provide the SEC with “original, timely, and credible information” that leads to a successful enforcement action.

Awards can range from 10 percent to 30 percent of the money collected when sanctions are more than $1 million.

Jordan Thomas, head of Labaton Sucharow’s SEC whistleblower practice, said Monday, “Mark my word, this is only the beginning of a revolution in ethical action for Corporate America. Bad actors are on notice.”

Thomas joined Labaton Sucharow from the SEC’s enforcement division, where he served as assistant chief litigation counsel.


Richard L. Cassin is the publisher and editor of the FCPA Blog.

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