CFTC on a $$$ roll – pays $30M to JPMorgan tipsters

Sanctions to promote change
February 14, 2018
Has the SEC gone soft?
February 28, 2018

Are you paying attention? Bigger money is at stake.

At the end of 2015, JPMorgan Chase & Co. agreed to pay a record $367 million asset-management settlement for its failure to properly inform some of its wealthier clients about conflicts of interest. A record $30 million of that settlement is going to the whistleblower who tipped off the regulators.

The Commodity Futures Trading Commission (CFTC) is paying out the $30 million for tips it received in the case, in which the bank settled accusations that it didn’t properly disclose it was steering asset-management customers into investments that favored the bank’s bottom line. So, in December 2015, JPMorgan agreed to pay the CFTC $367 million to make the case go away. That settlement included $100 million that went to the CFTC as a $40 million monetary penalty and $60 million in disgorgement. The bank agreed to pay the Securities and Exchange Commission (SEC) an additional $267 million.

Who says money can’t buy the truth?

Of the CFTC’s portion, $30 million is going to one whistleblower although four other members also had stepped up. According to a letter sent to the award applicants, four of the applicants applied too late or were insufficiently helpful to the investigators and so received no payout. According to reporting by Bloomberg News and InvestmentNews, the award is only the CFTC’s fifth since its first launched its whistleblower program five years ago, and far eclipses the $10 million award the agency granted in 2016. It’s just the CFTC’s second award in excess of $1 million.

SEC Pays JPMorgan truthtellers $61 million

Earlier last summer, the SEC also alerted six whistleblower applicants that one of them would receive $48 million and a second would get $13 million for their efforts. The $48 million award eclipses the SEC’s previous record of $30 million paid to an anonymous whistleblower in 2014.

Edward Siedle, a former SEC lawyer based in Ocean Ridge, Florida, says he acted as a whistleblower in obtaining the preliminary award determinations from the CFTC and from the SEC for the larger of its two awards, but declined to say whether he received one of the allocations.

Do whistleblowers deserve awards for pain and suffering?

Yes, says one former JPMorgan financial advisor with a whistleblower retaliation claim against the bank. “If the CFTC has granted an award, the individual or individuals who received it deserve every dime. The hardships whistleblowers deal with are almost unimaginable.”

So why is Jamie Dimon smiling?

One could say that despite the size of the awards, and its cross-agency exposures, $367 million is still a “drop” in JPMorgan’s bucket? Because at the same time the CFTC announced the record settlement, InvestmentNews also ran a headline noting that “for the second straight year, Jamie Dimon was the highest-paid chief executive officer of a Wall Street bank, garnering a small, 5.4% raise (noted to be the smallest increase among the five biggest Wall Street banks,” but still totaling $29.5 million, nearly the same as that pesky whistleblower.

Is JPMorgan fixing its problem?

The bank acknowledged disclosure lapses in informing wealth-management clients that it preferred to invest their assets in hedge funds and mutual funds managed by an affiliate and third-party funds that shared their fees with the bank. JPMorgan said the omissions in its communications were unintentional and that it has since enhanced its disclosures.

Was it worth the risk?

Maybe. Maybe not? After all, Dimon’s raise was the smallest of all his peers. But what about you, and your organization? Is it worth it the exposure, fines, and worse? That’s a question only you can answer. But that’s also where Patrina can help. We’ve built a business on helping organizations stay on the “straight and narrow” efficiently and cost-effectively. So, let’s talk. Call 212-233-1155 to ask about Patrina’s cost-effective and comprehensive, 8-module compliance solution, and compliant data capture, file storage, and records archiving specifically designed for the financial services community. Be smart. Be covered.

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