JP MORGAN CHASE will have to pay out $920 million in fines after it admitted wrongdoing in the so-called London Whale trading controversy.
The Securities and Exchange Commission in the US charged the firm today with misstating financial results and failing to detect and prevent its traders from fraudulently overvaluing investments in order to conceal a $6.2 billion loss.
The case was settled after JP Morgan agreed to pay a $200 penalty to the SEC and publicly admit it violated laws.
The remainder of the fines will be broken up among a number of global regulators: a further $220 million will be paid to the UK’s Financial Control Authority, while the Federal Reserve will receive $200 million and, finally, the US Office of the Comptroller of the Currency will get the biggest payout of $300 million.
Breaking a cardinal rule
“JPMorgan failed to keep watch over its traders as they overvalued a very complex portfolio to hide massive losses,” said George Canellos, a director of the SEC’s enforcement division.
While grappling with how to fix its internal control breakdowns, 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.
The settlement is the third biggest fine handed down to a banking firm by US regulators and the second largest in the UK.
It comes after traders in the London office built up massive loans through derivatives trades during 2012. Two former employees of the company have already been charged with committing fraud as they tried to hide the deals in one of the trading portfolios in the firm’s chief investment office.
“The settlements are a major step in the firm’s ongoing efforts to put these issues behind it,” JPMorgan said in a statement.
CEO Jamie Dimon, who got himself into hot water in April last year for describing the events as a “tempest in a teacup”, added:
“We have accepted responsibility and acknowledged our mistakes from the start, and we have learned from them and worked to fix them. Since these losses occurred, we have made numerous changes that have made us a stronger, smarter, better company.”
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