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The Commodities Futures Trading Commission (CFTC) recently awarded a bounty of $10 million to a whistleblower who offered original information voluntarily. The information led to the opening of an investigation and a subsequent successful enforcement action. According to the order, the individual provided the information properly via a Form TCR that involved information previously unknown to the CFTC, and in violation of the Commodity Exchange Act (CEA.) The whistleblower was under no obligation to provide this information, and provided it at the outset of the investigation, when the CFTC was unaware of the ongoing conduct.The Commodities Futures Trading Commission (CFTC) recently awarded a bounty of $10 million to a whistleblower who offered original information voluntarily. The information led to the opening of an investigation and a subsequent successful enforcement action.

According to the order, the individual provided the information properly via a Form TCR that involved information previously unknown to the CFTC, and in violation of the Commodity Exchange Act (CEA.) The whistleblower was under no obligation to provide this information, and provided it at the outset of the investigation, when the CFTC was unaware of the ongoing conduct. Continue reading

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The Commodity Futures Trading Commission (CFTC) has awarded a $625,000 bounty to four whistleblowers who provided information and assistance in an investigation. A total of nine claimants submitted award applications for this enforcement action. Of that number, only four received awards. Claimants 2, 3, 4, and 6 received bounties from the civil monetary penalties levied against the two defendants involved in the enforcement action. Claimant 4 offered the highest level of assistance and cooperation and received the largest portion of the bounty. All four offered substantial assistance that included providing names and other information which supported the Commission's action against the defendants. The Claims Review Staff (CRS) decided to deny award applications of claimants 1, 5, 7, 8, and 9. These claimants failed to meet the program’s requirements. Specifically, CRS found that Claimant 1’s wasn't voluntary, because it was provided after they received multiple requests including a subpoena from CFTC staff. After receiving the preliminary determination, Claimant 1 requested the records supporting that determination. CFTC Whistleblower staff provided the material shortly thereafter. Claimant 1 then submitted a letter contesting the preliminary determination. Because this claimant could not offer any new information to support their position, and nothing in the record indicated the voluntary submission of information, the request was again denied. This claimant provided the information only after multiple requests from CFTC. Therefore, the claimant was not eligible to receive an award in this case.The Commodity Futures Trading Commission (CFTC) has awarded a $625,000 bounty to four whistleblowers who provided information and assistance in an investigation.

A total of nine claimants submitted award applications for this enforcement action. Of that number, only four received awards. Claimants 2, 3, 4, and 6 received bounties from the civil monetary penalties levied against the two defendants involved in the enforcement action. Claimant 4 offered the highest level of assistance and cooperation and received the largest portion of the bounty. All four offered substantial assistance that included providing names and other information which supported the Commission’s action against the defendants. Continue reading

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The SEC has awarded $3M to three different whistleblowers for assisting with three distinct covered actions in three separate orders. 1. In the first order, the Claims Review Staff (CRS) awarded a bounty of $1.5 million to an individual who provided original information and voluntarily gave assistance to SEC staff that led to a successful covered action. 2. In the second order, CRS awarded a $1 million bounty to an individual who also voluntarily offered original information that led the SEC to a successful covered enforcement action. In this case, the whistleblower also assisted SEC staff, including multiple interviews. 3. The third order saw a bounty of $400,000 to a whistleblower who first reported their concerns internally, leading to a ceasing of the wrongful activity. The individual subsequently reported the information to the SEC, leading to the opening of an investigation. Over the course of the investigation, the whistleblower met with SEC Enforcement staff, offering additional information and continued assistance. Ultimately, the charges in the covered enforcement action would “bear a close nexus” to the whistleblower’s stated allegations.The SEC has awarded $3M to three different whistleblowers for assisting with three distinct covered actions in three separate orders.

1. In the first order, the Claims Review Staff (CRS) awarded a bounty of $1.5 million to an individual who provided original information and voluntarily gave assistance to SEC staff that led to a successful covered action. Continue reading

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Compared to the decades of experience investors have with the S&P and NASDAQ, everyone's a comparative rookie when it comes to cryptocurrency. And crypto's appeal often comes from the idea that crypto exists outside of traditional banking. However, overlooked in that idea is the reality that—not unlike traditional banking and other investment platforms—many crypto services charge users expensive fees for these crypto transactions. And these fees can get very steep, very quickly.  However, our experienced securities attorneys understand how the federal securities laws apply to cryptocurrency. All that's true, assuming that those platforms and third-party vendors are properly disclosing and administering those fees. But that's not always the case: In 2020, Robinhood paid $65 million in fines to settle claims that it failed to disclose commission fees and failed to get the best possible terms for when executing customers' orders. So let's discuss some elements that already can influence crypto fees.Compared to the decades of experience investors have with the S&P and NASDAQ, everyone’s a comparative rookie when it comes to cryptocurrency. And crypto’s appeal often comes from the idea that crypto exists outside of traditional banking. However, overlooked in that idea is the reality that—not unlike traditional banking and other investment platforms—many crypto services charge users expensive fees for these crypto transactions. And these fees can get very steep, very quickly.  However, our experienced securities attorneys understand how the federal securities laws apply to cryptocurrency. Continue reading

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In the past few years, industry-watchers have seen a rise in lawsuits filed against pension funds: Clients have been suing pension fund providers for charging excessive fees—even higher fees than they charge other clients for similar investment products—and other wrongdoing. And now, following a unanimous decision issued by the Supreme Court in January 2022, even more clients may begin bringing lawsuits against providers—since the Court's ruling clarifies pension fund providers' duties to their customers. Hughes v. Northwestern University In Hughes v. Northwestern University, the plaintiffs alleged that defendant Northwestern failed to meet the fiduciary duties required under the Employee Retirement Income Security Act of 1974 (ERISA) because it offered excessively expensive investment options and charged extreme recordkeeping fees. The Court of Appeals had held that, because the clients could ultimately pick a plan from a range of plans offered, Northwestern had fulfilled its responsibilities to them. However, the Supreme Court disagreed. Instead, the Court held that Northwestern's fiduciary duties required that it regularly analyze the value of the plans it offered. If the provider found plans that were less beneficial to their clients, the answer was not just to include more plans, but also to stop offering the less valuable plans. Accordingly, the fact that customers could exercise judgment in their plan selection did not alleviate Northwestern of its responsibility to make its own judgment calls.In the past few years, industry-watchers have seen a rise in lawsuits filed against pension funds: Clients have been suing pension fund providers for charging excessive fees—even higher fees than they charge other clients for similar investment products—and other wrongdoing. And now, following a unanimous decision issued by the Supreme Court in January 2022, even more clients may begin bringing lawsuits against providers—since the Court’s ruling clarifies pension fund providers’ duties to their customers. Continue reading

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In a previous post, we began to address some general ways in which a financial advisor can overcharge investment clients. But it's worth a bit more focus on one specific type of investment: margin accounts. Some advisors contractually steer customers into margin accounts as the default investment. But margin accounts are inherently riskier investments, and investors with these accounts are more vulnerable to being overcharged by their advisors. The Basics of Margin Accounts As the Securities and Exchange Commission (SEC) explains, in a margin account, clients pay part of the price for stock while a broker loans you the rest of the money to purchase securities. If the stock goes up, then clients can make a large return, but if the stock drops, they can lose a larger percentage of their investment than if they'd paid cash—even losing their entire investment. On top of that loss, they have to pay the relevant fees and the interest on the margin loan—even though the clients have lost all of the money the advisor has loaned them. Why Margin Accounts Can Lead To Large Losses By the very nature of the margin account, trades are made quickly and frequently—and advisors can make big changes to the client's investments entirely on their own. For example, if the advisor makes a "margin call," an advisor can sell a client's securities to pay for the loan without giving the client any notice of the sale or allowing any input on which securities the advisor will sell.In a previous post, we began to address some general ways in which a financial advisor can overcharge investment clients. But it’s worth a bit more focus on one specific type of investment: margin accounts. Some advisors contractually steer customers into margin accounts as the default investment. But margin accounts are inherently riskier investments, and investors with these accounts are more vulnerable to being overcharged by their advisors. Continue reading

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The SEC has again given an award to a whistleblower. This time it totals $3.5 million, and comes after multiple instances of support from the individual. The whistleblower’s contribution prompted SEC staff to investigate more possible securities violations. This made the investigation easier for the SEC staff, which saved them time and resources. The additional information also helped with the whistleblower’s discussion of settlement. Not one, but two SEC enforcement actions were successful as a result of the whistleblower’s assistance and cooperation. The second enforcement action came from the same “nucleus of operative facts”  as the first action.The SEC has again given an award to a whistleblower. This time it totals $3.5 million, and comes after multiple instances of support from the individual.

The whistleblower’s contribution prompted SEC staff to investigate more possible securities violations. This made the investigation easier for the SEC staff, which saved them time and resources. Continue reading

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Most whistleblowers are keen to keep their activity concealed and private until the information becomes public. In an unusual twist, one whistleblower decided to publish a research report online detailing the fraudulent activity of a company and that of its CEO prior to notifying the SEC of the fraud. Within days of sharing this information online, the whistleblower then shared the same information with the SEC. The individual was persistent in reaching out to SEC staff about this information. Their continued contact led to the SEC opening an investigation that resulted in a successful enforcement action. This whistleblower was an outsider, not an employee of the company. Without admitting or denying the findings, the Company and its CEO consented to the SEC’s order that required the Company to pay restitution as well as other remedies Ultimately, defrauded investors saw the return of millions of their dollars.Most whistleblowers are keen to keep their activity concealed and private until the information becomes public. In an unusual twist, one whistleblower decided to publish a research report online detailing the fraudulent activity of a company and that of its CEO prior to notifying the SEC of the fraud.

Within days of sharing this information online, the whistleblower then shared the same information with the SEC. The individual was persistent in reaching out to SEC staff about this information. Their continued contact led to the SEC opening an investigation that resulted in a successful enforcement action. This whistleblower was an outsider, not an employee of the company. Continue reading

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As we've blogged many times, the SEC pays whistleblowers monetary awards out of funds collected from companies and individuals that violate securities law through administrative fines and other sanctions. Since 2012, when the first award was made, the SEC has awarded $1.2 billion to 245 whistleblowers. In 2021 alone, the SEC saw an increase in whistleblower tips of 76% over 2020’s numbers. Most of these tips were related to corporate disclosure, financial statement misconduct, offering frauds, and market manipulation. The SEC issued more whistleblower awards in 2021 than in the entire previous ten years, including two of the largest bounties awarded to date. All told, the SEC awarded 108 individuals approximately $564 million in bounties in fiscal year 2021. To ensure that whistleblowers are not only properly compensated, but given incentive, the SEC is considering two changes to the whistleblower program. This will ensure that bounties are properly awarded, and individuals’ awards aren’t unintentionally reduced due to SEC or other agency policies.As we’ve blogged many times, the SEC pays whistleblowers monetary awards out of funds collected from companies and individuals that violate securities law through administrative fines and other sanctions. Since 2012, when the first award was made, the SEC has awarded $1.2 billion to 245 whistleblowers. Continue reading

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