Jordan A. Thomas

A Rule Meets Retaliation

In 2012, the head trader at Paradigm Capital Management reported securities-law violations to the Securities and Exchange Commission. The SEC later found that Paradigm removed him from that job, placed him in a compliance role, and instructed him to investigate the same conduct he had reported. The firm then stripped him of supervisory duties and other responsibilities. The underlying case concerned 83 principal transactions between a hedge fund and an affiliated broker, along with a conflicts committee that the SEC found lacked independence. In June 2014, Paradigm and its owner settled the Commission’s case for $2.2 million without admitting or denying the findings. It was the SEC’s first enforcement action under the whistleblower program’s anti-retaliation provision.

The employee’s identity remained confidential. Thomas led the Labaton Sucharow team representing him. In April 2015, the Commission awarded the whistleblower more than $600,000, the maximum thirty percent available in the covered action. The SEC said the award recognized both the information that led to the case and the retaliation the employee suffered after reporting it.

Thomas left the SEC in 2011, the year the agency adopted the rules governing the claim. In Paradigm, the Commission received the information directly, preserved the reporter’s identity, investigated the underlying trades, brought an anti-retaliation enforcement action, and later processed the whistleblower’s award claim.

A whistleblower may arrive with knowledge of a transaction, accounting entry, sales practice, or internal warning. Before the government decides whether a violation occurred, counsel must determine what the person knows firsthand, what documents lawfully support the account, when and where the information was reported, whether another source already supplied it to the SEC, and how employment or confidentiality obligations affect the submission.

Writing Rule 21F

Congress created the SEC whistleblower program in Section 922 of the Dodd-Frank Act. The Commission then had to turn the statute into working rules. The agendas for the SEC’s November 3, 2010 and May 25, 2011 open meetings list Thomas among the Enforcement Division and general counsel staff responsible for the proposed and final rules. Chair Mary Schapiro thanked him by name when the proposal was presented, and Enforcement Director Robert Khuzami singled out Thomas and four colleagues when the final rules were adopted.

Thomas served on the teams that turned Congress’s broad command into rules governing who may report, what counts as original information, how anonymity works, and when an award can be paid. The SEC did not divide authorship among individual staff members, but its records establish his participation in both stages of the rulemaking.

One dispute went directly to the place of internal compliance departments. Companies and compliance lawyers argued that employees should ordinarily report inside the company before approaching the SEC. They warned that a direct-reporting system could bypass investigations already designed to find and correct misconduct. The Commission declined to impose an internal-reporting requirement. Schapiro explained that a mandatory rule could block information from reaching the agency and expose some employees to retaliation before the SEC knew what they had reported.

The final rules used incentives instead. An employee who first reports internally and sends the same information to the SEC within 120 days can receive credit for the earlier date. The Commission may increase an award when the whistleblower used or assisted an internal compliance system, and it may reduce one when the claimant interfered with that system. The rules also limit information obtained through legal privilege and restrict claims by auditors, compliance personnel, and others whose jobs give them access to possible violations, subject to defined exceptions. Those provisions keep a path open to the government while rewarding internal reporting when it can work safely.

What the Claim Requires

Section 21F ties an award to original information that leads to a successful SEC action with monetary sanctions above $1 million. If the statutory conditions are met, the Commission awards between ten and thirty percent of the money it collects. It considers the significance of the information, the claimant’s assistance, the SEC’s interest in deterring violations, and participation in internal compliance. It may reduce the percentage for unreasonable delay, culpability, or interference with a company’s reporting process. The award comes from the Investor Protection Fund, which is financed through sanctions, rather than from money allocated to harmed investors.

An anonymous whistleblower must submit through an attorney. The attorney keeps a signed Form TCR identifying the client while the initial submission proceeds without the client’s name, and the claimant must disclose that identity to the SEC before payment. When an enforcement matter ends, the Commission posts a Notice of Covered Action. A person seeking an award generally has ninety days to file the claim. Missing that deadline, sending information through the wrong channel, or failing to establish that the information caused or substantially contributed to the action can end an otherwise serious claim.

The SEC’s fiscal 2025 report records more than $60 million awarded to 48 people in 31 covered actions, along with 275 denials. Denials included information that was not voluntary or original, tips that did not lead to the action, and information never submitted directly to the Commission. The SEC received about 27,000 tips, but roughly 12,000 came from two people. An award claim still requires evidence, legally useful information, and compliance with the program’s eligibility rules.

Inside Merrill’s Reserve Formula

The Merrill Lynch matter required command of both the whistleblower rules and the transactions reported to the SEC. Federal customer-protection rules required the brokerage firm to keep enough cash in a reserve account to meet its obligations to customers. According to the SEC, Merrill used complex options trades that lacked economic substance to reduce the amount the formula required. The trades freed billions of dollars each week for the firm’s use from 2009 through 2012 while the customers’ economic position remained unchanged.

A second practice placed customer securities in clearing accounts subject to liens. The SEC said Merrill held as much as $58 billion a day in those accounts between 2009 and 2015. If the firm had failed, customers could have faced a struggle to recover securities that the rules required Merrill to keep free from claims by its creditors. The Commission also found that language in severance agreements impeded former employees from communicating with the SEC, a violation of Rule 21F-17.

Merrill admitted wrongdoing and agreed in June 2016 to pay $415 million, consisting of $57 million in disgorgement and interest and a $358 million civil penalty. The SEC also credited the firm’s cooperation and extensive remedial work and required an independent compliance consultant. The case addressed reserve calculations, the custody of customer securities, and language that restricted contact with regulators; the SEC did not find that customers lost money.

In March 2018, the SEC announced that two whistleblowers would share nearly $50 million and a third would receive more than $33 million. Its release did not identify the people or connect the award publicly to Merrill. Thomas later said he represented the three Merrill insiders, and Labaton Sucharow identified its clients as the recipients tied to the Merrill case. The SEC preserved their anonymity while counsel confirmed the connection to the enforcement matter.

A later administrative order against former Merrill executive William Tirrell found that the original options trade had undergone internal review, that Merrill consulted an outside expert, and that regulators were contacted. Later versions changed in ways that reduced the reserve requirement by 28 to 40 percent without adequate disclosure. Tirrell settled without admitting or denying the findings and received a cease-and-desist order, with no monetary penalty. The case turned on a precise sequence: original review, changed trades, altered reserve calculations, and the disclosures the SEC found inadequate. Merrill’s cooperation and the absence of customer loss remained part of the same record.

Reconsidering the Award Rules

The SEC amended its whistleblower rules in September 2020. Two provisions drew particular concern from the whistleblower bar. One addressed when an action by another agency could qualify as a related action for an SEC award. The other stated the Commission’s authority to consider the dollar size of an award when setting a percentage. In January 2021, Thomas filed a lawsuit under the Administrative Procedure Act challenging those provisions. He argued that the changes departed from the statute and could reduce incentives for people with valuable information to come forward.

Contemporary analysis identified standing based in part on the amendments’ effect on representation agreements in award cases. Later that year, SEC Chair Gary Gensler separately directed the staff to prepare revisions because, in his view, the two amendments could discourage whistleblowers. Commissioners Hester Peirce and Elad Roisman objected to interim procedures the Commission adopted while reconsideration and litigation were pending. They argued that the agency was effectively setting aside duly adopted rules before replacing them.

In August 2022, the SEC adopted new amendments. The Commission expanded the circumstances in which it may pay an award based on a related action, and it confirmed that the dollar amount of a potential award may be considered to increase the award but not to reduce it. The changes addressed the same two issues Thomas had challenged, although the SEC did not attribute the amendments to his lawsuit.

The Work After the Rule

Thomas is now of counsel at DiCello Levitt in Washington, D.C., and chair of SEC Whistleblower Advocates PLLC, whose team joined DiCello Levitt in February 2026. Before entering private practice, he served in the SEC’s Enforcement Division as an assistant director and assistant chief litigation counsel. Earlier roles included trial work at the Justice Department, service as a Navy judge advocate, and a career in the Navy Reserve that ended at the rank of captain. He earned his law degree from Southwestern Law School and his undergraduate degree from Bennington College. He had also worked as a stockbroker while attending law school.