Articles Posted in Whistleblowers

Barclays Must Pay Back Sales Charges, Advisory Fees
The US Securities and Exchange Commission announced that Barclays Capital (BARC) has settled securities charges accusing the firm of overbilling clients. As part of the resolution, which includes paying over $97M, Barclays must pay back advisory fees and mutual fund sales charges to clients that were affected. The firm is settling without denying or admitting to the SEC’s findings.

The SEC’s case involved three sets of violations resulting in almost $50M in client overcharges. According to the Commission, two of Barclays advisory programs charged over 2,000 clients for services that were not conducted as presented. Meantime, 63 broker-dealer clients paid too much in mutual fund sales charges or fees because Barclays recommended that they purchase more costly share classes even though there were less expensive ones available. Also, over 22K accounts paid Barclays excess fees because the firm made billing mistakes and miscalculations.

Ex-SEC Staffer Accused of Securities Fraud
The SEC has filed charges against David R. Humphrey, one of its ex-employees, for securities fraud related to trades that he made. Humphrey worked with the regulator from 1998 to 2014.

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The US Securities and Exchange Commission has awarded almost $4M to an individual who gave the regulator specific details regarding “serious misconduct” and provided help, including “specialized” expertise and knowledge, during the agency’s probe into the allegations. In its release announcing the award, the SEC did not provided more details about the case because to do so might give away the identity of the whistleblower, which it always seeks to protect.

Since the SEC Whistleblower Program was established in 2011, the agency has awarded 43 individuals about $153M for voluntarily giving the agency useful and original information that ended up rendering a successful enforcement action Already, such actions stemming from whistleblower-provided information has resulted in over $953M in financial remedies imposed against those found to be have engaged in misconduct or other wrongdoing. Whistleblowers can be awarded anywhere from 10-30% of the money collected if that sum is $1M or greater.

As we mentioned, typically the identities of SEC whistleblowers are kept confidential. One of the reasons for this is so that the whistleblower is protected from professional or financial retaliation, especially if the individual blew the whistle on an employer.

The US Securities and Exchange Commission is awarding $7M, to be split between the three whistleblowers who helped the regulator go after an investment scam. This latest whistleblower award, the second issued this year, ups the collective total that the SEC has granted to 41 whistleblowers to $149M.

Of the $7M, about $4M will go to the whistleblower who gave the SEC information that helped start the regulator’s investigation. The other two whistleblowers, who provided additional new information during the probe, will split the $3M.

To date, SEC enforcement actions resulting from whistleblower tips have led to over $935M in financial remedies. Whistleblowers who provide the tips that lead to successful enforcement actions resulting in at least a $1M remedy are eligible to receive 10-30% of the money collected. Because the SEC is committed to protecting the identity and confidentiality of whistleblowers, details from these enforcement cases that could reveal their identities are kept confidential.

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The US Securities and Exchange Commission has announced that BlackRock Inc. (BLK) will pay $340K to settle civil charges accusing the New York-based asset manager of improperly utilizing separation agreements to get employees leaving the firm to waive their ability to receive an award as a whistleblower. BlackRock consented to the order brought by the regulator but did not deny or admit to the findings that it was in violation of any rules.

The SEC claims that over 1,000 BlackRock employees who exited the firm signed separation agreement that included language declaring that they were waiving any right to incentives that could be gained from reporting misconduct. The employees were required to sign these agreements if they wanted to receive any separation payments that BlackRock would owe them after their departure.

This waiver provision was added to BlackRock’s separation agreement in 2011 after the Commission had already put in place its Whistleblower Program rules. The firm continued to use the waiver with the agreements until early last year.

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In its first whistleblower award this year, the Securities and Exchange Commission is awarding a tipster who worked for a company accused of wrongdoing and had gone directly to the agency with what he knew with $5.5M.

According to The National Law Journal, This is the first time since the SEC began granting whistleblower awards in 2013 that a whistleblower did not have to abide by rules established by the 2010 Dodd-Frank Act. Under those rules, whistleblower tips need to be submitted in writing by fax, mailed, or submitted through the regulator’s website in order for the person providing the information to be eligible for an award. This whistleblower, however, had started working with the Commission on the case before the tip could be eligible for the awards authorized under Dodd-Frank. This latest award means that the SEC has now awarded 38 whistleblowers a total of $142M.

Meantime, the Commission continues to take action against companies that retaliate against whistleblowers. Last month, the regulator announced that SandRidge Energy Inc. settled charges accusing it of using illegal separation agreements and taking retaliatory action against a whistleblower who had brought concerns to the oil and gas company’s attention regarding the way that reserves were calculated. SandRidge is not denying or admitting to the SEC’s findings. It will, however, pay a $1.4M penalty.

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The U.S. Securities and Exchange Commission said that it has awarded a whistleblower over $900K for a tip that allowed the regulator to bring multiple enforcement actions. The regulator announced the award just a days after it awarded another whistleblower $3.5M, also for coming forward with information resulting in an enforcement action.

Since 2012, the regulator’s whistleblower program has awarded about $136M to 37 individuals. The SEC protects the identities of whistleblowers, which is one reason it doesn’t disclose details about the enforcement cases.

It is against the law for companies to retaliate against employers for turning whistleblower, and there are protections, as well as remedies in place in the event of retaliation. Whistleblowers who provide the SEC with unique and helpful information that makes it possible for a successful enforcement action rendering over $1M in monetary sanctions are entitled to 10-30% of the funds collected.

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The U.S. Securities and Exchange Commission has awarded another whistleblower for coming forward with information that has resulted in a successful enforcement action. This time the award amount is $3.5M. This latest award ups the total awarded by the regulator’s whistleblower program to about $135M to 36 individuals since 2012. The award comes a few weeks after the SEC announced it had issued $20M to another whistleblower in a different enforcement case.

The regulator awards individuals, who voluntarily come forward with original and useful information, 10 to 30% of monetary sanctions collected from a successful enforcement action, as long as that sum collected is greater than $1M.  To date, whistleblower tips have allowed the SEC to bring enforcement actions resulting in over $874M in financial remedies. Because the whistleblower’s anonymity is protected, details about each case that could expose the tipster’s identify are kept confidential.

Whistleblower Retaliation
Individuals who turn whistleblowers are supposed to be protected from retaliation under the Dodd Frank Act. However that isn’t always the case.  Now, an ex-Vanguard Group employee has filed a lawsuit accusing the firm of firing her because she engaged in whistleblower activity.

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In its third highest award to a tipster since the inception of its whistleblower program, the Securities and Exchange Commission has awarded an individual $20M for coming forward right away to disclose “valuable information” that allowed the regulator to swiftly bring an enforcement action against the wrongdoers before they could spend the funds.  This latest award ups the total awarded by the SEC to whistleblowers to $130M since 2012. The regulator issued its highest award to date, of $30M, in 2014 and awarded another whistleblower $22M in August.

The SEC Whistleblower Program allows the regulator to award the person who provided the tip 10-30% of  monetary sanctions collected. The sanctions, however, must exceed $1M. The tip should relate to a federal securities law violation that already happened, is currently taking place, or is about to happen, and it must be unique information. More than one whistleblower may qualify to receive an award from an over $1M sanction obtained as a result of the tips provided.

Because the law protects whistleblower confidentiality, more specifics about this latest case, including who was involved or who received the award, were not disclosed.

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The U.S. Securities and Exchange Commission is investigating whether Wells Fargo (WFC) violated whistleblower protections, in the wake of allegations of aggressive and illegal sales tactics, and misled investors over these allegations.  The probe comes after Senators Jeff Merkeley (D-Ore), Elizabeth Warren (D-Mass), and Robert Menendez (D-NJ) sent the Commission a letter asking the regulator to examine whether the bank misled investigators over cross-selling claims.

In the letter, the US senators asked the SEC to look into whether Wells Fargo violated  Sarbanes-Oxley’s internal control provisions and whistleblower protection laws by firing employees who attempted to report alleged misconduct involving fake accounts. The three senators also asked the Commission to look at whether the bank failed to properly disclose bogus accounts while marketing high figures related to the creation of accounts.

Wells Fargo recently came under fire for setting up some two million bogus accounts. It settled the case, which was brought by California prosecutors and federal regulators—including the Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau— for $185M in penalties and $5M in customer restitution. Questions have since arisen over why the bank did not notify investors about these cross-selling allegations until it settled with regulators, even though Ex-CEO John Stumpf admitted that he knew about the problems going as far back as 2013.

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NY Hedge Fund to Pay $413M to Settle Civil and Criminal Charges Over FCPA Violations
Och-Ziff Capital Management Group has settled both criminal and civil charges accusing the New York hedge fund of paying bribes to obtain business in Africa. This is the first hedge fund to face punishment over violating the Foreign Corrupt Practices Act. 
 
As part of its settlement with the SEC, Och-Ziff will pay almost $200M to the Commission. Meantime, the hedge fund’s CEO, Daniel S. Och, will pay the regulator almost $2.2M to resolve charges accusing him of causing certain violations. CFO Joel M. Frank also agreed to settle the SEC the charges against him and will pay a penalty.