JPMorgan Chase
Bank, the nation’s largest bank, admitted that its traders acted recklessly and
agreed to pay a $100 million fine to settle charges it used a manipulative
device in connection with the bank’s trading of credit default swaps.
The U.S.
Commodity Futures Trading Commission issued an order Wednesday bringing and
settling charges against JPMorgan, which it said violated the new Dodd-Frank
prohibition Photo: Kent Wang against manipulative conduct.
By selling a
staggering volume of swaps in a short period of time, JPMorgan, acting through
its traders in London, recklessly disregarded the principle on which market
participants rely, that prices are established based on legitimate forces of
supply and demand, the commission said.
After a
17-month investigation, the commission has found the bank liable for violating the
Commodity Exchange Act, as amended by the Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010, and commission regulations.
“In
Dodd-Frank, Congress provided a powerful new tool enabling the CFTC for the first
time to prohibit reckless manipulative conduct,” said David Meister, the commission’s
director of enforcement. “As this case demonstrates, the commission is now
better armed than ever to protect the market from traders, like those here, who
try to ‘defend’ their position by dumping a gargantuan, record-setting, volume
of swaps virtually all at once, recklessly ignoring the obvious dangers to
legitimate pricing forces.”
In addition
to paying a $100 million penalty, JPMorgan agreed to continue to carry out improvements
to its supervision and control system in connection with swaps trading activity.
Wednesday’s settlement with the commission comes at a time
when JPMorgan is in talks with the Justice Department to resolve unrelated
claims dating back to the 2008 financial crisis, according to the article
“JPMorgan Pays $100 Million, Admits Fault in London Trades.”
This latest
government action is just one in a long string of settlements the bank has
agreed to.
In
September, JPMorgan Chase agreed to pay $1 billion due to actions by other
agencies, including the Securities and Exchange Commission, also for the London
Whale trading scandal. The agencies charged the bank with misstating financial results and lacking effective
controls to prevent its traders from overvaluing investments to hide hundreds
of millions of dollars in trading losses.
In January, JPMorgan
was one of 10 banks to pay an $8.5 million settlement for faulty
mortgage and foreclosure procedures.
In July last
year, JPMorgan agreed to pay $92 million to resolve allegations that the
company engaged in illegal and anti-competitive practices related to municipal
bond derivative transactions.
Municipal
bond derivatives are contracts that tax-exempt issuers use to reinvest these
proceeds, or to hedge interest rate risk. A competitive bidding process or
direct negotiations often award these transactions.
In March
2012, JPMorgan was one of five financial institutions that agreed to a $25
billion settlement for mortgage misconduct.
