JANUARY 31, 2024. The Security and Exchange Commission (SEC) announced that J.P. Morgan Securities LLC (JPMS) will pay $18 million to settle charges for including language in its release agreements that impeded clients and customers from reporting potential securities law violations to the SEC.
From March 2020 through July 2023, JMPS had clients that were issued a credit or settlement of more than $1,000 sign confidential release agreements. The agreements included a confidentiality clause that required clients to not disclose the settlement, any facts relating to the settlement, and all information regarding the account. The JMPS agreements also prohibited clients from contacting the SEC, though it did allow them to respond to SEC inquiries.
In discussing the matter, the Director of the SEC’s Division of Enforcement had this to say:
Whether it’s in your employment contracts, settlement agreements or elsewhere, you simply cannot include provisions that prevent individuals from contacting the SEC with evidence of wrongdoing … But that’s exactly what we allege J.P. Morgan did here. For several years, it forced certain clients into the untenable position of choosing between receiving settlements or credits from the firm and reporting potential securities law violations to the SEC. This either-or proposition not only undermined critical investor protections and placed investors at risk, but was also illegal.
The SEC found that JPMS violated Rule 21F-17(a) under the Securities Exchange Act of 1934. This provision protects whistleblowers, prohibiting corporations from attempts to impede communications with the SEC about potential securities law violations. While this case did not have a whistleblower, SEC whistleblowers are eligible to receive 10 to 30 percent of recovered funds and the SEC relies on them to safeguard its rules and ensure corporations do not violate them.
If you would like to report your employer for requiring you to assign an agreement that impedes whistleblowing, or report securities, commodities, or banking fraud, you can contact attorneys at Tycko & Zavareei LLP. Eva Gunasekera and Renée Brooker are former officials of the United States Department of Justice and prosecuted whistleblower cases under the False Claims Act. Renée served as Assistant Director at the United States Department of Justice, the office that supervises False Claims Act cases in all 94 United States District Courts. Eva was the Senior Counsel for Health Care Fraud. Eva and Renée now represent whistleblowers. For a free consultation, you can contact Renée at [email protected] (tel.: 202-417-3664) or contact Eva Gunasekera at [email protected]. You can also go to Tycko & Zavareei LLP’s website for whistleblowers to learn more at www.fraudfighters.net.