The Securities and Exchange Commission today announced its highest ever Dodd-Frank whistleblower awards, with two whistleblowers sharing a nearly $50 million award and a third whistleblower receiving more than $33 million. The previous highest award of $30 million was given in 2014.
Those are the extent of the details the SEC has provided; specific details were redacted from the SEC order. By law, the SEC protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity.
Law firm Labaton Sucharow said that it represented the whistleblowers in the case, who 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," the law firm stated. "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."
Merrill Lynch paid $415 million in June 2016 and admit wrongdoing to settle charges with the SEC that it misused customer cash to generate profits for the firm and failed to safeguard customer securities from the claims of its creditors.
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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