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SEC and JPMorgan Reach Agreement in Principle over ‘Misleading Investors’

Tentative agreement would resolve two SEC investigations into sale of mortgage-backed securities

insideinvestorrelations.comNov 9, 2012

By Adam Brown

JPMorgan Chase has reached an agreement in principle with the SEC to resolve claims related to mortgage-backed securities by the investment bank and Bear Stearns, which JPMorgan acquired in 2008, according to a filing with the SEC.

The agreement is meant to resolve two investigations that form part of a series of SEC probes into allegations investors were misled into buying mortgage-backed securities in the run-up to the 2008 financial crisis. JPMorgan did not say how much the agreement could cost it.

‘The first now involves potential claims… relating to delinquency disclosures in connection with a single mortgage-backed securitization,’ JPMorgan says in a filing to the SEC. ‘The second involves potential claims against Bear Stearns entities and JPMorgan Securities relating to disclosures concerning settlements of claims against originators involving loans included in a number of Bear Stearns securitizations.

‘The firm has reached an agreement in principle with the staff of the SEC to resolve these matters. The agreement in principle is subject to approval by the SEC, as well as court approval. There can be no assurance the agreement in principle will be approved.’

In 2011 JPMorgan Securities agreed to a separate $154 mn settlement to resolve SEC charges that it misled investors in the run-up to the financial crisis, selling them mortgage-backed securities just as the housing market was starting to crash.

In another prominent settlement related to the financial crash, Goldman Sachs agreed to pay a penalty of $550 mn for omitting facts when it sold products linked to subprime mortgages as the housing market was starting to plummet. Citigroup’s principal US broker-dealer subsidiary was charged with misleading investors as the housing market came under stress and ordered to pay $285 mn in restitution to investors. Wells Fargo in August this year agreed to a $6.5 mn charge for selling mortgage-backed securities without understanding their complexity.

In JPMorgan’s filing to the SEC on November 8, the bank adds that ‘there is no assurance that the firm will not be named as a defendant in additional mortgage-backed securities-related litigation, and the firm has entered into agreements with a number of entities that purchased such securities that toll applicable limitations periods with respect to their claims.’

JPMorgan announced the agreement in principle in a quarterly filing with the SEC that also says the bank intends to resume its planned program to buy back as much as $15 bn of its own stock, starting with purchases of as much as $3 bn in the first quarter of next year.


Back to November 2012 Archive

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