Jane Norberg, the SEC's whistleblower chief. Credit: Diego M. Radzinschi

Updated at 1:54 p.m. 

The U.S. Securities and Exchange Commission on Monday awarded a whistleblower more than $33 million—the largest bounty issued in the seven-year history of the agency's program for rewarding tipsters—for tipping off authorities about misconduct at Merrill Lynch.

In addition to the $33 million award, which broke the previous high of $30 million issued in 2014 to a whistleblower in a foreign country, the SEC announced that two other tipsters would share a nearly $50 million award.

The three whistleblowers, represented by Labaton Sucharow LLP partner Jordan Thomas in New York, helped an SEC investigation into Bank of America Corp.'s Merrill Lynch brokerage that resulted in a $415 million settlement in 2016 and an admission that the firm's brokerage unit misused consumers' cash. The settlement resolved claims that Merrill Lynch violated the agency's Customer Protection Rule by keeping at its disposal billions of dollars that should have been deposited into a reserve account meant to protect customers in the event of the firm's failure.

Jordan Thomas

Thomas, a former SEC attorney, said the three whistleblowers reported anonymously through him to the SEC. The agency's rules require whistleblowers reporting anonymously to retain counsel.

“The best protection against retaliation and blacklisting is the ability to report anonymously,” Thomas said in a brief phone interview Monday. “My clients have been fortunate to avoid such negative outcomes because of the SEC whistleblower program.”

“As a result,” he added, “my clients have been able to live a normal life and will be able to live a normal life—just with a lot more money.”

In a prepared statement, Thomas described his clients as “a shining example of integrity in action” and said they planned to donate “a substantial part of this life changing award” to charities. Thomas declined to detail the fees he earned representing the three whistleblowers.

The SEC's announcement did not specify which enforcement action the three whistleblowers aided. The agency has a policy against identifying whistleblowers.

With the three bounties approved Monday, the SEC has now awarded 53 whistleblowers since the program's start. The agency has approved more than $262 million in whistleblower bounties since issuing its first award, of $50,000, in 2012.

”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 whistleblower office. ”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 latest awards come at a challenging time for the SEC's whistleblower program, which was created as part of the Dodd-Frank financial reforms passed in 2010.

In February, the U.S. Supreme Court unanimously ruled that whistleblowers must contact the SEC to benefit from Dodd-Frank's more robust protections against retaliation. The ruling dealt a blow to the SEC's broader interpretation of the statute. The agency and the U.S. Justice Department had taken the view that Dodd-Frank's whistleblower protections also extended to tipsters who only reported concerns internally to their employers.

Whistleblower lawyers have said the Supreme Court's ruling, in Digital Realty Trust v. Somers, could backfire against corporate America and drive employees who might otherwise report internally to contact the SEC with suspicions or evidence of misconduct.

For the SEC, the ruling raises the question of how vociferously the whistleblower office should continue to promote internal reporting as a first step for would-be tipsters. The SEC, which awards worthy whistleblowers with between 10 and 30 percent of money collected when sanctions from an enforcement action exceed $1 million, looks fondly on those who first raise concerns to their employers.

This report was updated with additional information about the SEC's awards.

The SEC's whistleblower order is posted below:

 

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