J.P. Morgan Sanctioned for Violating Whistleblower Protection Rule
On January 16, 2024, J.P. Morgan Securities LLC (JPMS) reached a settlement with the Securities and Exchange Commission (SEC) after facing charges of obstructing clients from reporting potential securities law violations, according to a litigation release.
The SEC announced that JPMS will pay an $18 million civil penalty to resolve the allegations, shedding light on the firm’s practices from March 2020 through July 2023.
According to the SEC’s order, JPMS regularly required retail clients to sign confidential release agreements if they had received a credit or settlement exceeding $1,000 from the firm. These agreements mandated clients to keep details of the settlement, underlying facts, and account-related information confidential. Despite allowing clients to respond to SEC inquiries, the agreements prohibited them from voluntarily contacting the SEC.
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, reportedly emphasized that including provisions preventing individuals from contacting the SEC is illegal, irrespective of where these provisions appear—whether in employment contracts, settlement agreements, or other documents.
The SEC alleges that J.P. Morgan put clients in a challenging position by forcing them to choose between accepting settlements or credits and reporting potential securities law violations to the SEC, a situation that undermines investor protections and violates the law.
Whistleblower Protection Rule Violation
The Whistleblower Protection Rule, specifically Rule 21F-17(a), is a regulation under the Securities Exchange Act of 1934 enforced by the U.S. Securities and Exchange Commission (SEC). This rule prohibits any action that hinders individuals from communicating directly with SEC staff about potential violations of securities laws.
The purpose of this rule is to protect whistleblowers who come forward with information about possible securities law violations, ensuring they can report such matters to the SEC without facing retaliation or interference from their employers.
Under Rule 21F-17(a), individuals are protected from any contractual or other arrangements that seek to impede their ability to report information to the SEC. This includes confidentiality or non-disclosure agreements that might prevent employees, clients, or other relevant individuals from reporting violations to the regulatory authorities.
In the recent case involving J.P. Morgan Securities LLC (JPMS), the SEC found that JPMS violated this rule by requiring clients to sign confidentiality agreements that restricted their ability to voluntarily contact the SEC, even though they were permitted to respond to SEC inquiries.
Consequences and Settlement Terms for J.P. Morgan
As part of the settlement, JPMS neither admits nor denies the SEC’s findings but has agreed to the following terms:
Censure: JPMS will be censured for its actions.
Cease and Desist: The firm commits to cease and desist from violating the whistleblower protection rule.
Civil Penalty: JPMS will pay an $18 million civil penalty.
Securities Fraud Attorneys
If you are concerned about your investments with J.P. Morgan Securities, please call the securities attorneys at The White Law Group at 1-888-637-5510.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm dedicated to helping investors in claims in all 50 states against their financial professional or brokerage firm. Since the firm launched in 2010, it has handled over 700 FINRA arbitration cases.
Our firm represents investors in all types of securities related claims, including claims involving stock fraud, broker misrepresentation, churning, unsuitable investments, selling away, and unauthorized trading, among many others.
With over 30 years of securities law experience, The White Law Group has the expertise to help investors defrauded in securities, investment and financial business transactions attempt to recover their investment losses. For more information, please visit our website, www.whitesecuritieslaw.com.
Tags: J.P. Morgan Securities, SEC sanction, Whistleblower regulation Last modified: January 16, 2024