SEC Awards $83 Million to Three Who Blew the Whistle on Merrill Lynch

The Securities and Exchange Commission will award three whistleblowers more than $83 million in connection with their assistance on a landmark enforcement action that resulted in Merrill Lynch paying $415 million to settle charges that it misused customer cash to generate profits for the firm and failed to safeguard customer assets.

Jordan Thomas
Labaton Sucharow
Washington, D.C.

These are the largest awards announced since the SEC Whistleblower Program was established seven years ago.

Two whistleblowers will share nearly $50 million award and a third whistleblower receiving more than $33 million.

The previous high was a $30 million award in 2014.

The whistleblowers, represented by Labaton Sucharow, tipped the SEC to long-running misconduct at Merrill Lynch, which over numerous years, executed complex options trades that lacked economic substance and artificially reduced the required deposit of customer cash in the reserve account.

Through the reckless conduct, Merrill Lynch violated the SEC’s Customer Protection Rules and put billions of dollars of customer funds at risk in order to finance its own trading activities.

“This historic award is a wake-up call for Wall Street,” remarked Jordan A. Thomas, Chair of the Whistleblower Representation practice at Labaton Sucharow. “With its protections, incentives and the ability to report anonymously, the SEC’s program empowers every citizen to be its eyes and ears. Mark my word, this is only the beginning of a revolution in ethical action for Corporate America. Bad actors are on notice.”

“Our clients represent the very best of Wall Street and feel vindicated by the SEC’s determination,” Thomas said. “By coming forward, these courageous executives protected millions of Merrill Lynch’s customers, but their impact is far greater than that. They are a shining example of integrity in action and will inspire others on Wall Street to break their silence and, as a bonus, a substantial part of this life changing award will be donated to local charities.”

A principal architect of the SEC Whistleblower Program, Thomas established Labaton Sucharow’s whistleblower practice in 2011.

“These awards demonstrate that whistleblowers can provide the SEC with incredibly significant information that enables us to pursue and remedy serious violations that might otherwise go unnoticed,” said Jane Norberg, Chief of the SEC’s Office of the Whistleblower.  “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 awarded more than $262 million to 53 whistleblowers since issuing its first award in 2012.

All payments are made out of an investor protection fund established by Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators.

No money has been taken or withheld from harmed investors to pay whistleblower awards.

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

Whistleblower awards can range from 10 percent to 30 percent of the money collected when the monetary sanctions exceed $1 million.

As with this case, whistleblowers can report jointly under the program and share an award.


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