JP Morgan Settles Fraud Charges for $153.6 Million
The Securities and Exchange Commission (SEC) announced that it had reached a $153.6 million settlement with JP Morgan Chase & Company (JPM) for charges that the firm misled investors about complex mortgage products leading up to the collapse of the housing market, as reported by Investment News. This marks another major settlement coming from the SEC investigations into the role that major Wall Street firms played in the 2008 financial crisis, coming a year after Goldman Sachs paid a record $550 million to settle similar charges. Among the charges by the SEC, was the fact that JPM failed to disclose to investors that Magnetar Capital hedge fund aided in picking the securities and was betting that it would default.
Several of the investors included the following: Thrivent Financial for Lutherans, a faith based membership organization in Minneapolis; Security Benefit Corporation, an insurance and retirement services company; General Motors Asset Management, which manages the automaker’s pension plans and several Asian financial institutions.
JP Morgan had sold some $150 million of the securitized products to a dozen or so financial institutions that lost nearly their entire investment. Under the settlement, $126 million will go to the investors with the remaining $27.6 million going to the U.S. Treasury. The settlement will seemingly do little harm to JP Morgan, since it amounts to less than 1% of the firm’s 2010 net income of $17.4 billion and less than the firm makes in one week.