JP Morgan Reaches $154 Million Settlement with SEC
JP Morgan Reaches $154 Million Settlement with
SEC
J.P. Morgan announced on Tuesday it has agreed to pay $154 million to settle charges made by the U.S. Securities and Exchange Commission that the bank misled investors in a complex mortgage securities transaction at the beginning of the housing market collapse. The bank also agreed to improve the way it reviews and approves mortgage securities sales. Under the settlement, investors harmed by the transaction will get all of their money back.
The SEC accused JP Morgan of structuring and marketing a synthetic collateralized debt obligation (CDO) and failed to inform investors that a hedge fund that helped select the assets in the CDO portfolio had a short position in more than half of those assets. As a result, the hedge fund was in a position to benefit if the assets defaulted.
“JPMorgan marketed highly complex CDO investments to investors with promises that the mortgage assets underlying the CDO would be selected by an independent manager looking out for investor interests,” said Robert Khuzami, director of the SEC's Division of Enforcement. "What J.P. Morgan failed to tell investors was that a prominent hedge fund that would financially profit from the failure of CDO portfolio assets heavily influenced the CDO portfolio selection.”
The settlement is part of the SEC's ongoing investigation into how banks bundled and sold risky mortgage-related investments leading up to the financial crisis of 2008. Goldman Sachs agreed to a similar settlement last year in which they agreed to pay $550 million, the largest settlement in the SEC's history. Federal regulators, the SEC included, have been investigating many of the nation's largest banks, and more charges are expected.
J.P. Morgan announced on Tuesday it has agreed to pay $154 million to settle charges made by the U.S. Securities and Exchange Commission that the bank misled investors in a complex mortgage securities transaction at the beginning of the housing market collapse. The bank also agreed to improve the way it reviews and approves mortgage securities sales. Under the settlement, investors harmed by the transaction will get all of their money back.
The SEC accused JP Morgan of structuring and marketing a synthetic collateralized debt obligation (CDO) and failed to inform investors that a hedge fund that helped select the assets in the CDO portfolio had a short position in more than half of those assets. As a result, the hedge fund was in a position to benefit if the assets defaulted.
“JPMorgan marketed highly complex CDO investments to investors with promises that the mortgage assets underlying the CDO would be selected by an independent manager looking out for investor interests,” said Robert Khuzami, director of the SEC's Division of Enforcement. "What J.P. Morgan failed to tell investors was that a prominent hedge fund that would financially profit from the failure of CDO portfolio assets heavily influenced the CDO portfolio selection.”
The settlement is part of the SEC's ongoing investigation into how banks bundled and sold risky mortgage-related investments leading up to the financial crisis of 2008. Goldman Sachs agreed to a similar settlement last year in which they agreed to pay $550 million, the largest settlement in the SEC's history. Federal regulators, the SEC included, have been investigating many of the nation's largest banks, and more charges are expected.
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