Financial Advisor Fraud

Financial Advisor Fraud

Financial Advisor Fraud 1200 800 Bo Frith

We’ve written before about the explosive growth of whistleblower lawsuits for financial fraud, especially with COVID funds. Just this week, the SEC levied fines of $18 million against JP Morgan.[1]

The megabank JP Morgan Chase will pay a $18 million fine as part of a settlement with the U.S. Securities and Exchange Commission. Under the agreement, which the bank agreed to without admitting or denying guilt, the SEC alleged JP Morgan unlawfully restricted clients from reporting violations of securities law to regulators.

From March 2020 to July 2023, the bank allegedly used confidentiality agreements to prevent clients from informing the SEC. JP Morgan regularly asked clients to sign confidential release agreements if they had been issued a credit or settlement from the bank for improper conduct.[2]  The settlements and payments JP Morgan issued ranged from $1,000.00 to $165,000.00 for hundreds of clients.[3]

Under the law, a financial entity cannot force a current or former customer from informing a regulatory agency of unlawful conduct (i.e. blowing the whistle). In JP Morgan’s case, the SEC said the agreements violated Rule 21F-17(a) under the Securities Exchange Act of 1934, a whistleblower protection rule prohibiting financial entities from impeding individuals from communicating with the SEC about securities law violations.[4]

While the JP Morgan case focused on agreements with clients, the SEC recently went after financial advisors for purportedly trying to prevent employees from reporting unlawful activity. In 2023, the SEC fined investment advisor D.E. Shaw $10 million for the use of employment agreements preventing the disclosure of corporate information to third parties.[5]


[1] Hill, Jon. SEC Hits JPMorgan Unit With $18M Whistleblower Rule Fine. Law360 (Jan. 16, 2024). Available at

[2] J.P. Morgan to Pay $18 Million for Violating Whistleblower Protection Rule. U.S. Sec. and Exch. Comm’n – Press Release (Jan. 16, 2024). Available at,firm%20of%20more%20than%20%241%2C000.

[3] See Note 1.

[4] See Note 2.

[5] SEC Charges D.E. Shaw with Violating Whistleblower Protection Rule. U.S. Sec. and Exch. Comm’n – Press Release (Sept. 29, 2023). Available at


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