American and British regulators are reportedly set to impose a fine of nearly US$800 million on JP Morgan Chase over the ‘London Whale’ derivatives scandal which led to the bank racking up US$6 billion in legal losses.
The regulators in question were the US Securities and Exchange Commission (SEC), the US Office of the Comptroller of the Currency, the Federal Reserve and the British Financial Conduct Authority (FCA).
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The bank may be made to make a rare declaration of wrongdoing in its agreement with the SEC, which recently introduced a policy demanding admissions of misconduct in certain types of civil settlements, according to reports from The Wall Street Journal.
Admissions of guilt could strengthen the hand of private plaintiffs, including bank investors demanding compensation for a decline in stock value in the aftermath of the London whale affair.
The settlements could be announced as soon as this week.
Investigations by the CFTC, the US Justice Department and the New York State Attorney General continue and could result in additional fines.
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By GlobalDataJPMorgan, the Federal Reserve, OCC, SEC and CFTC declined to comment.
In May 2012, Bruno Iksil, nicknamed the "London Whale" for his preference for huge trades, and his colleagues at the London unit of JPM’s chief investment office (CIO) lost US$6.2 billion through bad bets in a portfolio that was specifically designed to hedge the bank’s risk exposure.
This prompted an investigation by several US authorities and the bank’s CEO Jamie Dimon explained to the US senate why he didn’t ensure that the CIO’s risk managers adequately kept pace with the nature of the unit’s business.
On 13 September, PBI reported that JP Morgan is planning to spend an additional US$4 billion and commit 5,000 extra employees to fix risk and compliance issues after a slew of probes by regulatory authorities.
