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Tuesday, December 22, 2015

The J.P. Morgan Whistleblower Will Receive How Much?

Reported by Neil Anderson, Managing Editor

The whistleblower involved in the J.P. Morgan [profile] proprietary fund scandal is slated to take home an eight-figure sum for their trouble.

Jordan A. Thomas
Labaton Sucharow
Jordan Thomas, counsel for the whistleblower (whose identity is not being made public), confirms that his client "will be eligible for the monetary award" equivalent to between 10 and 30 percent of the total value of J.P. Morgan's $267-million SEC settlement (which includes both penalties and disgorgement). That translates into between $26.7 million and $80.1 million.

"Everything that involves a dollar is factored in," says Thomas, who is a partner at Labaton Sucharow and chair of its whistleblower representation practice. He tells MFWire that "the SEC has discretion" as to where in that band this award will fall.

On Friday the giant bank settled with both the SEC and the CFTC, admitting and acknowledging the charges involving its disclosures to clients around use of proprietary J.P. Morgan mutual funds and hedge funds. All-told, J.P. Morgan agreed to pay $307-million, including $267 million as part of the SEC settlement. Thomas previously revealed that an unnamed whistleblower tipped to SEC off about J.P. Morgan's practices.

Thomas says that, if the folks at J.P. Morgan had identified and dealt with the practices in question several years ago, "J.P. could have avoided or certainly minimized the sanctions that they suffered in this case."

"One of the things the case shows is the consequences of not addressing problems early," Thomas sasy. "It's a testament to the importance of having a strong compliance cultureu and identifying problems early."

Thomas, a former assistant director in the SEC's enforcement division who helped develop the SEC's whistleblower program, expects more mutual fund industry cases coming down the line.

"The SEC has effectively deputized all employees, contractors, and those who do business with the asset management industry, to report wrongdoing," Thomas says. "The probability of detection has dramatically increased since the passage of Dodd-Frank and the establishment of the SEC whistleblower program."

"The mutual fund industry is not immune from wrongdoing," Thomas adds. "Responsible organizations are and should be redoubling their efforts to strengthen internal reporting systems and establish a culture of integrity." 

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