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In JPMorgan case, a rare admission: bank broke the law

September 19, 2013|By Andrew Tangel
  • Mary Jo White, chairwoman of the U.S. Securities and Exchange Commission, listens during a Senate Banking Committee hearing in Washington, D.C., in July.
Mary Jo White, chairwoman of the U.S. Securities and Exchange Commission,… (Andrew Harrer / Bloomberg )

NEW YORK -- The $920-million settlement JPMorgan Chase & Co. struck with regulators in the "London Whale" fiasco contains something rare: an admission the bank broke the law.

The U.S. Securities and Exchange Commission, one of four agencies JPMorgan settled with, has long been criticized for letting Wall Street firms and employees escape enforcement actions without admitting their misdeeds.

But the JPMorgan settlement further underscores the SEC's stiffer posture under Mary Jo White, a former prosecutor who is now the agency's chairwoman.

Settlement documents in the case note: JPMorgan "admits to the facts set forth below and
acknowledges that its conduct violated the federal securities laws."

White has said she would throw out the hallmark "neither admit nor deny" language of regulatory settlements in certain cases. The SEC also recently extracted an admission of wrongdoing from hedge fund mogul Philip Falcone.

"While not every case will be appropriate for admissions of wrongdoing, the SEC required JPMorgan to admit the facts in the SEC’s order – and acknowledge that it broke the law – because JPMorgan’s egregious breakdowns in controls and governance put its millions of shareholders at risk and resulted in inaccurate public filings," said George Canellos, the SEC's co-director of enforcement. 

JPMorgan wound up losing more than $6 billion in the fiasco. Traders in the bank's London office made risky derivatives bets that eventually backfired. Former employees have been charged criminally for allegedly covering up the losses.

The SEC's cut of the settlement announced Thursday is $200 million. The agency said it would put the money into a fund to repay investors harmed by the bank's misstatements.

Other agencies that are part of the broad settlement with JPMorgan are the U.S. Office of the Comptroller of the Currency, the Federal Reserve and the British Financial Conduct Authority.

The settlement does not end the bank's "London Whale" troubles, however. JPMorgan said in a regulatory filing Thursday that staff of the Commodity Futures Trading Commission planned to file a related enforcement action.

"The settlements are a major step in the firm's ongoing efforts to put these issues behind it," JPMorgan said in a statement. "The company cooperated extensively with each of these inquiries, and continues to cooperate with ongoing inquiries, including the prosecutions" or two former employees.

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