JPMorgan to pay $920m trading fine

JP Morgan and Chase, seeking to end probes of a $6.2bn (€4.6bn) trading debacle, admitted to violating federal securities laws and agreed to pay about $920m for failing to implement adequate controls and providing incomplete information to regulators and its board.

Senior management knew in Apr 2012 that the bank’s chief investment office in London, which was responsible for the loss, was using aggressive valuations that hid $750m in losses, the Securities and Exchange Commission said in a statement. Some executives “expressed reservations” at signing off on JPMorgan’s first-quarter earnings filings last year as required under the Sarbanes-Oxley Act, the SEC said.

The settlement resolves claims by the SEC, the US Office of the Comptroller of the Currency, Federal Reserve and the UK Financial Conduct Authority. The Justice Department and Commodity Futures Trading Commission are among agencies still investigating the trading loss at the CIO, a unit of the New York-based bank that was supposed to help reduce risk and manage excess deposits. JPMorgan said yesterday it was notified by the CFTC that its staff intends to recommend enforcement action.

“JPMorgan failed to keep watch over its traders as they overvalued a very complex portfolio to hide massive losses,” George S. Canellos, co-director of the SEC’s Division of Enforcement, said in the statement. “JPMorgan’s senior management broke a cardinal rule of corporate governance and deprived its board of critical information it needed to fully assess the company’s problems and determine whether accurate and reliable information was being disclosed to investors and regulators.”

Senior management failed to adequately update the board’s audit committee on the CIO losses before the first-quarter earnings report, the SEC said. While the SEC didn’t identify individuals involved, it said senior management includes one or more of the following as of May 10, 2012: chief executive officer Jamie Dimon, former chief financial officer Douglas Braunstein, former chief risk officer John Hogan, the company’s then-controller Shannon Warren and the bank’s general auditor.

The losses led to the indictment of two former traders this week, the departure of at least four senior managers and a blow to the reputation of Dimon, 57, whose pay was cut in half.

Dimon said the bank accepted responsibility from the start, and is now a “stronger, smarter, better” company.