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Articles Posted in Whistleblowers

In a Securities and Exchange Commission (SEC) whistleblower case that resulted in a company probe and two successful enforcement actions, the regulator has awarded $4.5M to the individual who stepped forward to provide the key information. This person is the 62nd one to receive an SEC whistleblower award since the Commission began granting them in 2012.

According to the regulator, the whistleblower provided an anonymous tip internally to the company about the alleged wrongdoing, as well as a similar tip to the SEC within 120 days. The information compelled the company to conduct its probe into the misconduct allegations and then report them to the Commission and to a second agency. After the company concluded its investigation, it notified both agencies of the outcome.

While the SEC didn’t provide specifics about the whistleblower case—it refrains from doing so in order to protect the confidentiality of any informants/claimants—The Wall Street Journal identified the claimant as an ex-Brazilian orthopedic surgeon who brought up concerns about an alleged kickback scam run by a subsidiary of Zimmer Biomet Holdings.

The US Securities and Exchange Commission (SEC) has awarded $50M to two individuals who acted as whistleblowers, helping the regulator to render a successful enforcement action because of the quality information they provided. Details of the enforcement action and the identity of the whistleblowers are not disclosed so as to protect their identities. However, the SEC did announce that one of the whistleblower awards is for $37M and the other is for $13M.

The SEC awards individuals that voluntarily share unique, credible, timely, and relevant information that then leads to a successful enforcement action when the resulting monetary sanctions imposed is more than $1M. 10-30% of that may then be awarded to the SEC whistleblower , or in some case, the whistleblowers.

Since the inception of the SEC whistleblower program in 2012, the regulator has awarded 61 individuals about $376M. All whistleblower awards come out of an investor protection fund set up by Congress. Money in the funds come out of monetary sanctions that have been paid to the Commission. Whistleblower awards are never taken out of any funds that investors who sustained losses from fraud might be able to recover.


Citigroup Must Pay Over $12M Over Dark Pool Allegations

To settle Securities and Exchange Commission that it misled users of a dark pool run by an affiliate, Citigroup Global Markets Inc. (CGMI) and the affiliate, Citi Order Routing and Execution (CORE), will pay $12M. The regulator contends that Citigroup (C) misled users when it told them that high-frequency traders were prohibited from trading in Citi Match, despite the fact that two of the dark pool’s most active users qualified as high-frequency traders. These traders had executed over $9B in orders.

Dark pools are private securities exchange that allows investors, usually big financial institutions, to make anonymous trades. Members of the investing public cannot trade in dark pools. High-frequency trading typically involves the use of supercomputers, usually by financial firms, to make trades within microseconds.

The US Securities and Exchange Commission announced this month that it is granting $55.5M in whistleblower awards to three people—two of them over the same enforcement action. These latest awards means that 58 whistleblower have been collectively awarded $322M since the regulator began issuing these in 2012.

In the same enforcement action, the SEC awarded $15M to one whistleblower and $39M to another. The latter award is the second largest award that the agency’s whistleblower program has granted to one person to date.

Under the SEC’s program, individuals who voluntarily provide unique, timely, and true information to the Commission, with said information resulting in a successful enforcement action and sanctions of over $1M, may be eligible to receive 10-30% of the funds collected. All awards are taken out of an investor protection fund set up by Congress. The money in the fund comes from sanctions paid by securities law violators.

The US Securities and Exchange Commission has awarded two whistleblowers almost $50M and another over $33M in the largest whistleblower awards that the regulator has issued to date. This ups the total of SEC whistleblower awards granted to $262M to 53 individuals in the last six years.

According to the SEC Office of the Whistleblower Chief Jane Norberg, these latest awards show that whistleblowers can offer information that is “incredibly significant,” making it possible for the regulator to go after serious violations that could have gone “unnoticed. “ Until these latest awards, the largest SEC whistleblower award granted was $30M in 2014.

Whistleblowers who provide quality, unique information involving securities law violations that lead to a successful enforcement action rendering over $1M in monetary sanctions may be eligible to receive an award that is 10-30% of the funds collected.

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The Commodity Futures Trading Commission will pay $30M to one whistleblower who provided information that brought about the $367M asset management settlement in a case against JPMorgan Chase & Co. (JPM). Federal regulators alleged that the bank didn’t tell wealth management clients about conflicts of interests that may have affected how the financial institution managed their money between 2008 and 2013. The two JPMorgan units involved were its nationally chartered bank and its securities subsidy.

JPMorgan, which is the biggest bank in the US according to assets, neglected to tell customers that it made money when it placed their money in hedge funds and mutual funds that earned the firm fees. Both high net worth customers and retail mutual fund customers were purportedly affected.

The bank was also accused of not telling investors that it’s wealth business preferenced its own proprietary products over others’ products when deciding where to invest clients ‘funds. JPMorgan was accused of violating its fiduciary duty when it failed to notify customers that more costly share classes of proprietary mutual funds were chosen for them. Although JPMorgan acknowledged its failure to properly disclose the information, the bank maintained that such omissions were not done on purpose, and it has since remedied the matter.

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A jury in Manhattan federal court found that UBS Group (UBS) owes ex-commercial mortgage-backed securities strategist Trevor Murray $903K after he turned whistleblower on the Swiss lender. Murray contends that he was fired after reporting that CMBS traders had tried to affect his research reports, which were supposed to be independent.

Murray claims that UBS CMBS bond trading head and managing director David MacNamara insisted on screening drafts of the strategist’s reports in advance, which violates firm policy. The former UBS strategist accused Kenneth Cohen, his former boss, of being the one to instigate the pre-clearance process and calling his reports “off message.”

Testifying about one instance, Murray spoke about how Cohen instructed him not to put down anything negative regarding the hotel sector since UBS was engaged in financing for a Miami Beach hotel. The ex-UBS strategist said that he disregarded Cohen’s alleged instructions and notified clients about his worries.

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SEC Awards Whistleblower $4.1M
A company insider who notified the US Securities Exchange Commission about a “widespread, multi-year securities law violation” involving the employer, is getting a $4.1M whistleblower award. The individual, who is a foreign national employed abroad, also provided information and help during the regulator’s probe. Further details about the case have been kept confidential so as to protect the confidentiality and anonymity of the whistleblower.

This is the third whistleblower award issued this month by the SEC. The regulator awarded two other people $8M each for their help in another successful enforcement action.

To date, the SEC whistleblower program has awarded 50 whistleblowers over $179M.

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The US Securities and Exchange Commision has awarded $16M to two whistleblowers—$8M each—for the crucial information and help they provided in bringing a successful securities enforcement action. If you consider that a whistleblower may be eligible for 10-30% of funds collected when the monetary sanctions of the SEC action that the individual helped to bring is greater than $1M, the sanctions imposed in this latest case must have been significant.

According to the regulator, one whistleblower reported a “particular misconduct” that became central to the SEC’s enforcement action. The other whistleblower provided additional key information and continued to cooperate with the agency during its probe. The latter’s contributions reportedly saved the Commission time and resources.

These latest awards bring the amount awarded to SEC whistleblowers—49 of them—to over $175M. Alleged wrongdoers accused in the regulators’ cases have been ordered to pay $1B in financial remedies, including over $671M in disgorgement.

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The US Securities and Exchange Commission is ordering Wells Fargo & Co.’s (WFC) wealth management unit to pay $3.5M for alleged anti-money laundering reporting violations. Wells Fargo Advisors agreed to pay the penalty. It is settling the charges but without denying or admitting to the regulator’s findings.

According to the SEC, starting in early 2012, new bank managers started pressing compliance officials to cease in their submission of suspicious activity reports. The failure to file these SARs reports, or delay them, reportedly occurred 50 times in a little over a year and involved accounts for international customers who were previously named in such reports.

Federal law mandates that broker-dealers notify the U.S. Treasury Department’s Financial Crimes Enforcement Network about any transactions of at least $5K that they believe may involve illegal activity. The regulator blames a “new senior manager” that was hired in the brokerage firm’s compliance group and placed in charge of the anti-money laundering program.

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