On January 16, 2024, The Whistleblower Securities and Exchange Commission (SEC) reported that JP Morgan agreed to pay 18 million dollars in order to settle charges brought against them for interfering with brokerage customers and advisory clients’ ability to act as whistleblowers and inform the SEC of possible securities law violations.
Specifically, from March 2020 through July 2023 JP Morgan consistently requested that their clients sign confidential release agreements if they were issued settlements in excess of $1,000. As a result of signing these confidentiality agreements, the company’s clients were required to keep the settlement, as well as all facts pertaining to the settlement and the account in question confidential. Although JP Morgan did not prevent these clients from responding to inquiries from the Whistleblower Securities and Exchange Commission, clients were barred from initiating contact with the SEC.
According to the SEC’s order, JP Morgan violated Rule 21F-17(a) under The Securities Exchange Act of 1934, which protects whistleblowers by disallowing parties from restricting individuals’ right to notify SEC employees of potential securities law violations. JP Morgan, without acknowledging or refuting the Whistleblower Securities and Exchange Commission’s conclusions, consented to being censured, committed to refraining from breaching the whistleblower protection rule, and agreed to settle the $18 million civil penalty.
The Director of the SEC’s Division of Enforcement, Gurbir S. Grewal, explained that JP Morgan’s alleged behavior not only directly violated Rule 21F-17(a), but also put clients in an impossible situation, “Whether it’s in your employment contracts, settlement agreements or elsewhere, you simply cannot include provisions that prevent individuals from contacting the SEC with evidence of wrongdoing. But that’s exactly what we allege J.P. Morgan did here. For several years, it forced certain clients into the untenable position of choosing between receiving settlements or credits from the firm and reporting potential securities law violations to the SEC. This either-or proposition not only undermined critical investor protections and placed investors at risk, but was also illegal.”
What is the role of the Whistleblower Securities and Exchange Commission in corporate governance?
The Whistleblower Securities and Exchange Commission plays a crucial role in corporate governance by regulating securities markets and enforcing laws designed to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation:
Regulating Securities Markets: The SEC oversees securities exchanges, securities brokers and dealers, investment advisors, and mutual funds to ensure they operate in compliance with securities laws. This regulation helps maintain the integrity of the financial markets.
Enforcing Securities Laws: The SEC enforces federal securities laws, such as the Securities Exchange Act of 1934 and the Sarbanes-Oxley Act of 2002. These laws aim to prevent fraud, insider trading, and other illegal activities in the securities markets.
Disclosure and Transparency: The SEC requires companies to provide accurate and timely disclosure of financial information and other material information to investors. This includes annual and quarterly reports, proxy statements, and other filings, which help investors make informed decisions.
Investor Protection: One of the primary goals of the SEC is to protect investors from fraudulent or deceptive practices in the securities markets. The SEC investigates and takes enforcement actions against individuals and companies that violate securities laws, thereby safeguarding investor interests.
What protections are offered to whistleblowers by the Securities and Exchange Commission?
Protection Against Retaliation: The Whistleblower Securities and Exchange Commission prohibits employers from terminating, demoting, or harassing an employee after said employee reports potential securities law violations internally or to the SEC. Whistleblowers who experience retaliation may be entitled to legal remedies, including reinstatement, back pay, and other forms of relief.
Anti-retaliation Enforcement: Whistleblowers who experience retaliation can file complaints with the SEC alleging violations of whistleblower anti-retaliation provisions. The SEC can take enforcement action against employers who engage in retaliation, including imposing civil penalties and other sanctions.
Protection of Whistleblower Identity: Whistleblowers’ identities are kept confidential throughout the investigation and enforcement process, and the Whistleblower Securities and Exchange Commission does not disclose identifying information about whistleblowers without their consent unless required by law or court order.
What are the benefits of consulting with a Whistleblower Securities and Exchange Commission attorney?
Consulting with a Whistleblower Securities and Exchange Commission (SEC) attorney can offer a variety of benefits for individuals considering reporting securities law violations or already involved in the whistleblower process:
Expert Guidance on Whistleblower Laws: Whistleblower SEC attorneys specialize in the laws, regulations, and procedures governing the SEC whistleblower program. They possess in-depth knowledge of the legal framework and can provide comprehensive guidance on the whistleblower process, including eligibility criteria, potential rewards, and protections against retaliation.
Protection of Rights and Interests: Whistleblower attorneys prioritize the protection of their clients’ rights and interests throughout the whistleblower process. They can advise whistleblowers on how to navigate potential risks and challenges, including retaliation from employers or colleagues while ensuring their confidentiality and anonymity to the extent permitted by law.
Maximizing Whistleblower Awards: Whistleblower Securities and Exchange Commission attorneys can help whistleblowers maximize their potential monetary awards under the SEC whistleblower program. They understand the factors that contribute to successful whistleblower claims and can assist whistleblowers in providing high-quality, actionable information to the SEC that may lead to significant enforcement actions and monetary sanctions.