JPMorgan Chase has agreed to pay $920 million to settle charges brought in a coordinated global settlement regarding the bank’s trading losses in the London Whale case.
JPMorgan will pay a $200 million penalty to the Securities and Exchange Commission for misstating financial results and lacking effective internal controls, and $720 million to the U.K. Financial Conduct Authority, the Federal Reserve and the Office of the Comptroller of the Currency.
JPMorgan has also agreed to admit guilt in the charges brought by the SEC, which include misstating financial results and lacking effective internal controls to detect and prevent its traders from fraudulently overvaluing investments to conceal hundreds of millions of dollars in trading losses.
The SEC previously charged two former JPMorgan traders with committing fraud to hide the massive losses in one of the trading portfolios in the firm’s chief investment office (CIO).
The SEC’s subsequent action against JPMorgan faults its internal controls for failing to ensure that the traders were properly valuing the portfolio, and its senior management for failing to inform the firm’s audit committee about the severe breakdowns in CIO’s internal controls.
Along with the penalty and admitting the facts underlying the SEC’s charges, JPMorgan Chase has publicly acknowledged that it violated the federal securities laws.
George Canellos, co-director of the SEC’s Division of Enforcement, said in a Thursday statement announcing the settlement that “JPMorgan failed to keep watch over its traders as they overvalued a very complex portfolio to hide massive losses.”
While grappling with how to fix its internal control breakdowns, he continued, “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.”