JPMorgan whistleblowing case said to spur US$30M award
Bank failed to properly disclose potential conflicts of interest to some clients
NEW YORK JPMorgan Chase & Co.’s failure to properly inform some rich clients about conflicts of interest has resulted in a record US$30 million whistleblower award by U.S. futures regulators.
The Commodity Futures Trading Commission will pay out that amount for tips received in the case, in which the bank didn’t properly disclose that it was steering asset-management customers into investments that would be profitable for the bank, according to a person familiar with the matter.
JPMorgan agreed in December 2015 to pay a record US$367 million asset-management settlement. That included US$100 million that went to the CFTC, described as a US$40 million monetary penalty and US$60 million in disgorgement. The bank agreed to pay the SEC an additional US$267 million.
Of the CFTC’s portion, US$30 million will go to one applicant, according to a letter this week sent to a total of five applicants, the person said, asking not to be identified because the matter isn’t public.
The other four applied too late or hadn’t helped investigators, according to the person, who reviewed the agency’s letter.
The award would be the CFTC’s fifth since its first whistleblower award five years ago, eclipsing a US$10 million award the agency granted in 2016. It’s just the CFTC’s second in excess of US$1 million.
The CFTC didn’t respond to requests for comment. Elizabeth Seymour, a spokeswoman for JPMorgan, declined to comment.
The SEC, in a preliminary decision in July, informed six whistleblower applicants that one of them would receive US$48 million and a second would get US$13 million. The others didn’t get any award. The SEC’s previous record of US$30 million was paid to an anonymous whistleblower in 2014.
Edward Siedle, a former SEC lawyer based in Ocean Ridge, Fla., acknowledged 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.
The SEC, through spokeswoman Judith Burns, declined to comment.
“If the CFTC has granted an award, the individual or individuals who received it deserve every dime,” said Johnny Burris, a former financial adviser for JPMorgan with a whistleblower retaliation claim against the bank pending before an administrative law judge. “The hardships whistleblowers deal with are almost unimaginable.”
Burris acknowledged applying for an SEC whistleblower award related to its JPMorgan settlement but declined to say whether he had received one or was part of the CFTC proceedings.
Once the CFTC makes a preliminary determination, applicants have 60 days to appeal.
Under the Dodd-Frank Act of 2010, the SEC and CFTC operate separate whistleblower programs. Each can provide claimants between 10 per cent and 30 per cent of recoveries, based on the value of the information provided.
JPMorgan, the largest U.S. bank by assets, has 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 thirdparty 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.