Banking giant JPMorgan Chase agreed Thursday to pay $920 million in fines to US and British regulators over actions involved in last year’s “London whale” trading debacle.
“JPMorgan failed to keep watch over its traders as they overvalued a very complex portfolio to hide massive losses,” the US Securities and Exchange Commission said in announcing the settlement.
JPMorgan, the largest US bank by assets, lost about $6.2 billion in 2012 on the soured trading bets.
The trading violations “demonstrated flaws permeating all levels of the firm: from portfolio level right up to senior management,” said the Financial Conduct Authority (FCA), the British regulator.
JPMorgan will pay a combined $700 million in fines to US agencies: $200 million to the SEC, $200 million to the Federal Reserve and $300 million to the Office of the Comptroller of the Currency.
It will pay a $220 million penalty to the FCA.
Under the global settlement, the SEC required JPMorgan to admit publicly that it had violated US securities laws.
The SEC slammed JPMorgan for “woefully deficient accounting controls” and faulted the bank’s senior mangement for improperly alerting the firm’s audit committee at key moments as they learned of the trading losses. As a result, the auditors could not verify the accuracy of financial statements.
The public mea culpa action was needed “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, co-director of the SEC’s Division of Enforcement.
“We have accepted responsibility and acknowledged our mistakes from the start, and we have learned from them and worked to fix them,” JPMorgan chief executive Jamie Dimon said in a statement.
“Since these losses occurred, we have made numerous changes that have made us a stronger, smarter, better company.”
JPMorgan signaled that it continues to face tough regulatory scrutiny on the case, dubbed the “London whale” for the location and the massive size of the toxic derivatives bets, and on other matters.
“Litigation and other government investigations previously disclosed are ongoing,” JPMorgan said in a securities filing Thursday.
These include investigations by the US Commodities Futures Trading Commission, the US Department of Justice and the Massachusetts Securities Division.
JPMorgan said in the filing that it had been notified Monday by the CFTC that the agency intends to recommend an enforcement action in the “London whale” case.
Also this week, the US Attorneys Office in New York indicted two former JPMorgan employees involved in the trades, Julien Grout and Javier Martin-Artajo. An attorney for Grout said his client was a “pawn” in the government’s “highly politicized case against JPMorgan Chase.”
JPMorgan has said it is cooperating with the investigations.
The SEC’s Canellos said that while the settlement ends the matter for JPMorgan, the agency’s investigation is continuing with respect to individuals involved in the case.
Besides the London whale, JPMorgan faces several other high-profile investigations, including criminal probes into its electricity trading in the US and its sale of mortgage-backed securities ahead of the 2008 housing bust.
The probes come amid a political debate in Washington on whether additional rules are needed to protect the economy from distress in banks considered “too big to fail.”
In the wake of the regulatory problems, Dimon has vowed to beef up compliance at the bank, hiring some 4,000 employees to work on financial controls, boosting spending in this area by about $1 billion and providing about 750,000 hours of regulatory and compliance training.
“If you don’t acknowledge mistakes, you can’t fix them and learn from them,” Dimon said in an email message to employees this week. “So now, as in the past, we are recognizing our problems, rolling up our sleeves and fixing them.”
Shares in JPMorgan, a member of the blue-chip Dow Jones Industrial Average, were down 0.9 percent in midday trade.