SEC Rewards Help Bring Forward the Whistleblowers

Financial Times, InsideCounsel, Investopedia
September 26, 2016

Jordan A. Thomas discusses how recent successful whistleblower tips allow the SEC to give more awards at a faster pace

Bank of America Corp.'s Merrill Lynch brokerage unit will pay $415 million and admit to wrongdoing to settle charges that it misused customer cash in the largest customer protection settlement in the United States in the Securities and Exchange Commission’s (SEC) history. A bank executive with the details of a complex trading scheme that inflated the bank’s profits informed Jordan Thomas, a partner at Labaton Sucharow who focuses on whistleblower cases. After meeting with three bank executives troubled by the trades, Thomas alerted U.S. regulators.

The SEC has not yet formally determined whether his clients deserve credit, but under a five-year-old program, the tipsters stand to receive a multimillion dollar reward. The SEC already has paid out $107 million to 33 individuals for help in bringing or pursuing cases.

“They’re picking up the pace. Right now, we’re looking at $100 million worth of awards as a major milestone and it is. But in coming years, the monetary awards paid out in one year will be $100 million. All things considered, the SEC has achieved something remarkable and unprecedented,” Thomas explained to the Financial Times

Thomas also discussed the success of the whistleblower program with InsideCounsel stating, “the SEC’s whistleblower program is beginning to hit its stride.” Thomas added that the number and size of awards are increasing as well. “The ones in the pipeline are just now maturing. We’re just starting to see the first cases because people didn’t know about the program. Now as awareness builds, more people are submitting tips, too. On top of that, it takes some two to four years for the SEC to complete an investigation. Moreover, it takes another one to one-and-a-half years to get through the award process,” Thomas said.

In an article published in Investopedia, Thomas compared the whistleblower program to a startup: "they opened up a business when Dodd-Frank was passed six years ago, there was no market awareness of the program, and there'd never been a program like it." According to a survey that Labaton Sucharow spearheaded with the University of Notre Dame in 2015, 63 percent of U.S. financial services professionals were aware of the program.