SEC Staff Endorses $61 Mln Award for Two JPMorgan Whistleblowers
Two whistleblowers whose outing of JPMorgan Chase’s bias toward selling wealth customers in-house funds led to the bank’s $267 million settlement with the government will receive payments equal to 23% of the award, according to a “preliminary determination” letter by SEC claim-review staffers.
The letter, a copy of which whistleblower Johnny Burris provided to AdvisorHub and other publications, recommends that the regulator pay one whistleblower 18% of the award, or $48.1 million, while a second receive 5%, or $13.1 million. The SEC by policy does not name whistleblower award recipients, and Burris would not confirm whether he was one of the successful claimants.
The requests of four other claimants for an award were denied because their information did not contribute to the SEC’s examinations, corollary investigations or significantly affect its enforcement action against JPMorgan, according to the letter. The award would far top the previous record of $30 million, which the SEC announced in September 2014.
The SEC in December 2015 leveled penalties of $267 million against JPMorgan Securities and JPMorgan Chase Bank in December 2015 for failing to disclose its conflicts of interest to wealth management customers over their promotion of in-house products, while the Commodity Futures Trading Commission reached a $40 million settlement with the bank units in related investigations.
The SEC award letter recommended denial of the whistleblowers’ claims for additional awards from the CFTC, writing in footnotes that its fellow regulator’s enforcement actions do not qualify as “related” under federal law and saying that the second whistleblower’s request for double recovery would “create an impermissible absurd result” under the Dodd-Frank Wall Street Reform and Consumer Protection Act provisions.
The letter, signed Tuesday by the SEC’s whistleblower claims review staff, said the allocation of the 23%-of-settlement award was determined by the fact that one claimant took more than a year to report the alleged questionable practices, which it determined was an “unreasonable delay.”
The SEC letter did not break out specific dollar figures but gave percentages of the monetary sanctions it said it received from the JPMorgan entities. Under SEC rules, monetary sanctions refer to full amounts recovered, including penalties, disgorgement, and interest, said Jason Zuckerman, a Washington D.C. lawyer who represents whistleblowers but was not involved in the JPMorgan cases.
A spokeswoman for the SEC declined to comment.
Burris is now a registered investment advisor in Surprise, Arizona, managing $11 million in 50 accounts, according to a May regulatory filing from Burris Wealth Management. His wrought efforts to fight JPMorgan’s practices in pushing high-commission in-house funds led to his firing in November 2012 and was the subject of a New York Times feature in 2013 called “Selling the Home Brand: A look Inside an Elite JPMorgan Unit.”
The Financial Industry Regulatory Authority in September 2016 fined Burris $5,000 and suspended him for five days for allegedly failing to execute an elderly couple’s trade order and attempting to resolve their complaints without informing JPMorgan, according to his BrokerCheck history.
The Labor Department’s Occupational Safety and Health Administration unit in January ordered JPMorgan to pay $150,000 in back pay, damages and legal expenses to Burris for wrongfully firing him in November 2012 and to expunge his record of fictitious client complaints. A spokeswoman for JPMorgan, which has said it would appeal the DOL decision, declined to comment.
After Burris’s termination from JPMorgan’s Sun City brokerage office, he worked for just over a year each at Oppenheimer and Southeast Securities, according to BrokerCheck. He first registered as a securities representative in April 1997 at Bank of America’s BA Investment Services, according to the Finra database.
—Jed Horowitz contributed to this story.