Merrill Lynch whistleblowers get record $83M Securities and Exchange Commission award
Three whistleblowers received a record $83 million award for providing information that led to a $415 million Merrill Lynch settlement with the Securities and Exchange Commission, the tipsters' lawyers said Monday.
The former Bank of America executives provided information that showed the bank's Merrill Lynch brokerage misused customers' cash from 2009 to 2012 to finance its own trading and generate profits, said Jordan Thomas, who chairs the whistleblower representation practice at law firm Labaton Suchow.
The revelation came after the SEC announced the award, but, complying with a secrecy law, did not disclose information that could directly or indirectly identify the whistleblowers.
"Our clients represent the very best of Wall Street and feel vindicated by the SEC's determination," said Jordan. "They are a shining example of integrity in action and will inspire others on Wall Street to break their silence."
A 2016 SEC enforcement action found that Merrill Lynch engaged in complex options trades that had no economic substance. Instead, the transactions artificially reduced the legally required amount of customer cash the brokerage held in a reserve account. The maneuver freed up billions of dollars per week that Merrill Lynch was able to use for its proprietary trading, the SEC said.
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"Had Merrill Lynch failed in the midst of these trades, the firm’s customers would have been exposed to a massive shortfall in the reserve account," the Wall Street regulator said in its 2016 order against the brokerage.
Bank of America issued a statement at the time that said it had cooperated with SEC investigators.
"While no customers were harmed and no losses were incurred, our responsibility is to protect customer assets and we have dedicated significant resources to reviewing and enhancing our processes," the bank said in 2016. "The issues related to our procedures and controls have been corrected."
In all, the SEC has awarded more than $262 million to 53 whistleblowers since issuing its first such award in 2012, the regulator said Monday. Tipsters who give the SEC information that leads to sanctions of more than $1 million are eligible for awards ranging from 10% to 30% of the money collected.
"We hope that these awards encourage others with specific, high-quality information regarding securities laws violations to step forward and report it to the SEC," Jane Norberg, chief of the SEC's whistleblower office, said in a statement issued Monday.
Follow USA TODAY reporter Kevin McCoy on Twitter: @kmccoynyc