JP Morgan Chase

London Whale Says He is Not Responsible for Over $6.2B in Losses Involving JPMorgan

Published on: February 24, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Bruno Iksil, the man dubbed the London Whale, has finally spoken out. Iksil, a former trader for JPMorgan Chase & Co. (JPM), was blamed for up to $6.2B in losses—a massive sum, hence the nickname. Unlike others involved, however, Iksil has been able to avoid prosecution after reaching a deal in which he agreed to help U.S. authorities with their cases and testify against others involved.

In a letter to Bloomberg, Iskil said that managers in the London chief investment office “repeatedly” told him to execute the strategy that led to the losses. He noted that the nickname he was given, “London Whale,” implies that one person was responsible for the trades involved when, he contends, others were involved in the debacle. Iksil said that his responsibility was to execute a strategy that senior management had put forth, approved, supervised, and ordered.

He maintains that he told superiors that there was a risk of huge loss with a trading strategy that they wanted him to execute, in part to lower the unit’s risk-weighted assets. Despite his concerns, said Iksil, his supervisors continued to tell him to continue with the strategy.

The trades involved were credit-swap index tranches. Tranches let investors bet on different levels of risk among a number of companies. If a borrower doesn’t meet its obligation, then the credit swaps must pay the buyer at face value. If t debt is defaulted, then the value the buyer must be paid is less.

JPMorgan Says to Expect Losses on Energy Loans

Published on: February 23, 2016 | by Shepherd Smith Edwards & Kantas, LLP

JPMorgan Chase 7 Co. (JPM) reported a double-digit drop in investment banking revenues, along with a $500 increase in provisions set aside for losses expected on energy loans. The latter is a result of declining oil prices, market volatility, regulator pressure, low interest rates, and other issues. Crude oil dropping to about $32/barrel has not helped.

According to Forbes, previously, the bank had set aside $815M to cover lending losses in the energy sector. The firm also has exposures to the extent that JPMorgan has put aside $350M for credit losses related to mining. The bank also is involved in $4.1B of commercial real estate lending in areas that are energy sensitive and a $2.7B business banking book in the gas and oil industry.

The Business Recorder reports that the firm’s portfolio for oil and gas is $43 billion. Its latest projections are a departure from last month, when JPMorgan told investors that it expected to make incremental increases to loss reserves related to energy-related loans.

UK Regulator Fines Ex-JPMorgan Executive $1.1 Over London Whale Debacle

Published on: February 9, 2016 | by Shepherd Smith Edwards & Kantas, LLP

The UK’s Financial Conduct Authority is fining former JPMorgan Chase (JPM) executive Achilles Macris approximately $1.1M for failing to cooperate and communicate properly with regulators during the agency probe into the London Whale fiasco. Although Macris is now agreeing to settle the securities charges, he continues to defend himself. He insists that he stayed “above and beyond any reasonable” transparency standards and that he is only agreeing to resolve this case because the F.C.A. had accepted his contention that he did not mislead anyone on purpose. The FCA would not comment on Macris’ statements about the settlement.

The former JPMorgan executive was in charge of the firm’s chief investment office in London, which was supposed to invest funds for the bank and help offset possible losses. Unfortunately, a bad bet made by the unit on credit derivatives cost the bank $6.2B.

Senator Warren Accuses the SEC of Poor Enforcement

Published on: January 31, 2016 | by Shepherd Smith Edwards & Kantas, LLP

U.S. Senator Elizabeth Warren has issued a report in which she claims that the U.S. Securities and Exchange Commission and the U.S. Department of Justice have been doing a poor job on enforcement when it comes to going after companies and individuals for corporate crimes.

In Rigged Justice: How Weak Enforcement Lets Corporate Offenders off Easy, Warren takes a closer look at what she describes as the 20 worst federal enforcement failures of 2015. The Senator noted that that when federal agencies caught large companies in illegal acts, they failed to take substantial action against them. Instead, companies were fined for sums that in some cases could be written off as tax deductions.

Some of the 2015 cases that Warren Mentions:
• Standard & Poor’s consented to pay $1.375B to the DOJ, DC, and 19 states to resolve charges that it bilked investors by putting out inflated ratings misrepresenting the actual risks involved in collateral debt obligations and residential mortgage-backed securities. Warren Points out that the amount the credit rater paid is less than one-sixth of the fine the government and states had sought against it, and at S & P did not have to admit wrongdoing. No individuals were prosecuted in this case.

• Citigroup (C), Barclays (BARC), JPMorgan Chase (JPM), Royal Bank of Scotland (RBS), and UBS AG (UBS) paid the DOJ $5.6B to resolve claims that their traders colluded together to rig exchange rates. As a result, the firms made billions of dollars while investors and clients suffered. While admissions of guilt were sought, no individuals were prosecuted. Also, the SEC gave the banks waivers so they wouldn’t have to deal with collateral damages from pleading guilty.

JPMorgan Chase to Resolve Mortgage Fraud Case by Ambac for $995M

Published on: January 27, 2016 | by Shepherd Smith Edwards & Kantas, LLP

JPMorgan Chase & Co. (JPM) has consented to pay $995M to settle claims brought by Ambac Financial Group claiming that the insurance company was fooled into insuring hundreds of mortgage bonds that were backed by poor quality loans. As part of the settlement, Ambac will withdraw its opposition to a $4.5B deal reached between the firm and investors, such as Pacific Investment Management Co. (PiMCO) and BlackRock Inc (BLK), over faulty home loans.

One of Ambac’s units was the number two largest bond insurer in the world eight years ago, when the growing number of mortgage defaults caused it to become inundated with claims. The settlement with JPMorgan will conclude two lawsuits over the quality of loans backing mortgage bonds that were sold by Bear Stearns & Co., which JPMorgan purchased in 2008. It also resolves the insurer’s efforts to recover payments of principal plus interest on approximately $3.3B of nearly a dozen MBS trusts sponsored by Bear Stearns unit EMC Mortgage LLC.

According to Bloomberg, this latest settlement opens the door for a judge to approve the settlement between JPMorgan and institutional investors.

JPMorgan Chase Resolves “London Whale” Class Action Securities Lawsuit for $150M

Published on: December 22, 2015 | by Shepherd Smith Edwards & Kantas, LLP

JPMorgan Chase & Co. (JPM) will pay $150 million to resolve investor claims accusing the firm of concealing up to $6.2 billion in losses caused by the trader Bruno Iksil, who was given the nickname “London Whale.” Pension funds filed a class action securities case accusing the firm of using its investment office in London as a secret hedge fund. According to the plaintiffs, the bank told them that the office was managing risk when what it was actually doing was making trades for profit. Investors were harmed when huge losses resulting from transactions made through the London office caused the bank’s share price to drop.

The pension funds said that they suffered tens of millions of dollars of losses because fund managers were provided with information that was “false and misleading.” They also believe that the bank knowingly concealed the growing risks that were occurring at the London office.

Plaintiffs of this lawsuit include the Ohio Public Employees Retirement System, which says it lost $2.5 million, the Arkansas Teacher Retirement System, the state of Ohio, funds in Arkansas, Swedish pension fund AP7, and other JP Morgan shareholders that purchased stock between 2/24/10—this is when the company submitted to regulators its 2009 earnings report—and 5/21/12. The latter date is when the firm announced that it was stopping a $15 billion share buyback program until it could get a better handle of the losses sustained.

J.P. Morgan Chase Settles SEC and CFTC Charges Alleging Client Steering for $307M

Published on: December 18, 2015 | by Shepherd Smith Edwards & Kantas, LLP

J.P. Morgan Chase & Co. (JPM) will pay $307M to resolve Securities and Exchange Commission and Commodity Futures Trading Commission charges accusing two of its units of not telling wealthy clients about certain conflicts of interest. The JPM businesses are J.P. Morgan Securities LLC, its wealth management investment advisory business that offers investment products to clients that have a net worth of $250K – $5M, and JPMorgan Chase Bank N.A., its U.S. private bank that deals with clients that have a $5M net worth or greater.

According to the agreement, the investment advisory service did not tell wealth management customers that its Chase Strategic Portfolio, which is a program for wealth management customers, favored mutual funds managed by the firm. For several years, the program put about $10 billion of $32.6 billion in proprietary funds, and until the earlier part of 2012, at least 47% of the assets were in such funds.

The private bank also showed a similar preference toward the bank’s products. It was not until 2011 that it told clients that language in its disclosures noting that it preferred managers affiliated with JPM had been “mistakenly” removed. The language was not put back until last year.

Ex-J.P. Morgan Bankers to Settle SEC’s $8.2M Bribery Case Related to Jefferson County, Alabama Bonds

Published on: December 2, 2015 | by Shepherd Smith Edwards & Kantas, LLP

Douglas MacFaddin and Charles LeCroy will pay $326,373 to settle SEC civil charges accusing them of paying friends of Jefferson County, Alabama officials $8.2M in return for $5B in county bond business. Together, the ex-J.P. Morgan Securities (JPM) executives will pay $326,373 once a district court judge approves the proposed settlements—that’s 4% of the $8.2M that was allegedly paid so that their firm could get the business.

Jefferson Count experienced financial woes when it borrowed funds so it could comply with a 1996 court order to stop sewer leaks from getting into area streams. Additional construction costs and bond swaps cost the project to exceed over $3B.

The Commission’s lawsuit had alleged violations of its law and rules. The regulator’s charges against the two men were resolved in mediation.

Securities News: J.P. Morgan Face Restrictions on Raising Clients Funds In the Wake of Improper Product Disclosures to Investments, Intel Sued Over Improperly Investing 401K Funds, and Citigroup, Bank of America, Other Big Banks Get New Bailout Rules

Published on: October 30, 2015 | by Shepherd Smith Edwards & Kantas, LLP

SEC Seeks to Limit JP Morgan’s Ability to Raise Client Money
An Over $200K settlement between J.P. Morgan Chase & Co. (JPM) and regulators has stalled because of efforts by federal regulators to limit the firm’s ability to raise money for clients. The move is an attempt to place a wider variety of consequences on financial firms accused of breaking regulations.

J.P. Morgan had settled allegations accusing it of failing to make proper disclosures when marketing its investment products to clients over the products offered by competitors. Now, the SEC wants the firm to say yes to limits on its ability to sell bonds or stocks through private placements for several years. Such a restriction could hamper its private bank’s efforts to raise funds for hedge funds and other clients through a key channel or sell bonds or stocks privately to rich investors and other sophisticated investors.

While banks are allowed to conduct private placement offerings, firms that violate the rules that these securities are under will lose privilege unless they are given a waiver.

Lawsuit Accuses Intel of Investing 401K Monies Improperly
An ex-Intel Corp. employee is suing company officials for breach of fiduciary duty. According to Christopher M. Sulyma, the company invested defined 401K participants’ retirement funds in high risk, costly private equity funds and hedge funds.

Morgan Stanley, JPMorgan, Barclays and Other Banks To Pay $1.86B to Settle Credit Default Swaps Price Fixing Claims

Published on: October 20, 2015 | by Shepherd Smith Edwards & Kantas, LLP

Details of the settlement involving a dozen big banks accused of conspiring to rig prices and restrict competition in the credit default swaps market have been released. According to papers filed in federal court in Manhattan last week, the following firms will collectively pay nearly $1.9 billion:

· JPMorgan Chase & Co. (JPM): $595M

· Morgan Stanley (MS): $230M

· Barclays Plc (BARC): $178M

· Goldman Sachs (GS): $164M

· Credit Suisse (CS): $159M

· Bank of America Corp. (BAC): $90M

· Deutsche Bank (DB): $120M

· BNP Paribas (BNP): $89M

· Citigroup (C): $60M

· Royal Bank of Scotland (RBS): $33M

· HSBC Holdings Plc (HSBC): $25M