Today JP Morgan Chase Co acknowledges wrongdoing in investment activities by two London traders and agrees to pay approximately $920 million to the U.S and UK. These are civil charges and do not include commodities and futures trading activity nor criminal investigations. The significance of this settlement is that bank officials admitted to the oversight in the valuation models as the audit committee reported these too late according to current SEC standards. The investigation started over losses valued at over six billion from the derivatives trading activity by Bruno Iksil, the “London Whale,” who agreed to testify for immunity in the U.S.
The SEC and three other agencies in a global settlement announced penalties against JP Morgan Chase Co valued at approximately $920 million from investment activities by two London traders in 2012. The coordinated global settlement filed separately involves the U.K. Financial Conduct Authority (FCA), the Federal Reserve, and the Office of the Comptroller of the Currency (OCC).
The SEC charged JP Morgan Chase Co for concealment of trading losses which JP Morgan will pay $200 million, admit to the underlying facts and publicly acknowledge it violated the federal securities laws. The charges include misstating financial results and inefficient internal controls for detecting and prevention of traders’ valuations resulting in concealment of trading losses of hundreds of millions.
“The trading instruments were complex but these traders had a simple rule to follow: tell the truth about their fair value,” said George S. Canellos, Co-Director of the SEC’s Division of Enforcement. “Yet these traders brazenly accumulated a massive position in derivatives with lax oversight, and then lied to cover up their massive losses when the market turned against them.”
In a press release today by JP Morgan Chase, JP Morgan Chase CEO and Chairman Jaime Dimon acknowledged the wrongdoing.
“We have accepted responsibility and acknowledged our mistakes from the start, and we have learned from them and worked to fix them. We will continue to strive towards being considered the best bank - across all measures - not only by our shareholders and customers, but also by our regulators. Since these losses occurred, we have made numerous changes that have made us a stronger, smarter, better Company.”
JP Morgan Chase (NYSE:JPM) reported a profit margin of 25.77 percent for the second quarter of 2013 in comparison to last year's 21.94 percent.
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