The CFTC has finally approved what is expected to be the largest award in the history of its whistle-blower-awards program: According to Bloomberg, the commission has authorized a $30 million award for information about JP Morgan neglecting to inform its wealthy asset-management clients about conflicts of interest involving the bank's investment recommendations.
The award represents 30% of the $100 million in penalties and surrendered profits that the CFTC received in a December 2015 settlement with the bank.
The CFTC made the award public on Thursday without naming individuals or the bank. According to the attorney, Edward Siedle, it was the culmination of a December 2015 settlement in which JPMorgan agreed to pay regulators a total of $367 million for failing to disclose that it was steering asset-management clients into investments that would be especially profitable to the bank.
That included $100 million that went to the CFTC -- $40 million in penalties and $60 million in disgorgement. The bank agreed to pay an additional $267 million at the time to the Securities and Exchange Commission, where a pair of preliminary whistle-blower awards totaling $61 million were authorized a year ago but still await final approval.
It's also the fifth award in the history of the CFTC program, which was created along with a separate whistle-blower program at the SEC as part of the Dodd-Frank act. As the claimant's attorney, Edward Siedle, said, many bank whistle-blowers aren't aware that there's "a commodities element" to many cases of investment fraud, which opens the door to the CFTC's involvement, and the possibility of more settlement money.
"We hope that an award of this magnitude will incentivize whistle-blowers to come forward with valuable information and provide notice to market participants that individuals are reporting quality information about violations" of commodities-trading law, said CFTC Chairman J. Christopher Giancarlo.
Siedle acknowledged earlier Thursday that an unnamed client of his acted as a whistle-blower in obtaining the CFTC award. Siedle said he had also obtained a preliminary award from the SEC on behalf of the same client.
"Most would-be whistle-blowers overlook the fact that there’s a commodities element in most investment fraud," Siedle said. "This award demonstrates that the CFTC is willing to act quickly on those complaints if contacted."
In a separate award granted last year, the Securities and Exchange Commission handed two whistle-blowers a combined $61 million bounty, equivalent to roughly 23% of its $267 million settlement with JPM.
Under Dodd-Frank, the SEC and CFTC run two separate whistle -blower award programs. Each allows whistle-blowers to receive between 10% and 30% of total recoveries, depending on the value of the information they provide. Those settlements are often worth tens - if not hundreds - of millions of dollars.
So far, no comments from fortress-balance-sheet CEO Jamie Dimon on the award or the underlying fraud as he likely sees this a just another 'storm in a teacup'... although he knows a fraud when he sees one.