Three Whistleblowers Awarded $83 Million in Connection with Merrill Lynch SEC Fine

On March 19, 2018, the Securities and Exchange Commission (“SEC”) announced its highest-ever whistleblower award, with the three recipients of the award receiving a total of approximately $83 million.  The award involved three whistleblowers, two of whom split $50 million, and one of whom provided greater assistance in the process, thereby receiving $33 million.  The $83 million award represents 20% of the $415 million fine levied against Merrill Lynch (“Merrill”) by the SEC. This fine was the result of Merrill gaming SEC Rule 15c3-3 – a regulation that mandates broker-dealers keep customer cash separate from firm cash, so that in the event of a bankruptcy, customer funds would not be jeopardized.  Merrill circumvented this rule by writing derivative contracts that would allow customer cash to be held in Merrill accounts.  Merrill customers suffered no actual loss from these derivative contract trades that they were entered…

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