More than originally estimated, apparently…
Another day, another major bank adjust its reported data based on 'all-new' information about regulatory probes over its market manipulation. Last week was Citi, this week it's JPMorgan… with a double-whammy:
First, The SEC sanctioned 13 firms – including JPMorgan – for violating a rule primarily designed to protect retail investors in the municipal securities market in the sale of Puerto Rico bonds earlier this year…
- *SEC SANCTIONS 13 FIRMS FOR SALES OF PUERTO RICO JUNK BONDS
- *SEC INSTITUTES PROCEEDINGS VS JPMORGAN,INVESTMENT PROFESSIONALS
All municipal bond offerings include a “minimum denomination” that establishes the smallest amount of the bonds that a dealer firm is allowed to sell an investor in a single transaction. Municipal issuers often set high minimum denomination amounts for so-called “junk bonds” that have a higher default risk that may make the investments inappropriate for retail investors. Because retail investors tend to purchase securities in smaller amounts, this minimum denomination standard helps ensure that dealer firms sell high-risk securities only to investors who are capable of making sizeable investments and more prepared to bear the higher risk.
In its surveillance of trading in the municipal bond market, the SEC Enforcement Division’s Municipal Securities and Public Pensions Unit detected improper sales below a $100,000 minimum denomination set in a $3.5 billion offering of junk bonds by the Commonwealth of Puerto Rico earlier this year. The SEC’s subsequent investigation identified a total of 66 occasions when dealer firms sold the Puerto Rico bonds to investors in amounts below $100,000. The agency instituted administrative proceedings against the firms behind those improper sales: Charles Schwab & Co., Hapoalim Securities USA, Interactive Brokers LLC, Investment Professionals Inc., J.P. Morgan Securities, Lebenthal & Co., National Securities Corporation, Oppenheimer & Co., Riedl First Securities Co. of Kansas, Stifel Nicolaus & Co., TD Ameritrade, UBS Financial Services, and Wedbush Securities.
The enforcement actions are the SEC’s first under Municipal Securities Rulemaking Board (MSRB) Rule G-15(f), which establishes the minimum denomination requirement. Each firm agreed to settle the SEC’s charges and pay penalties ranging from $54,000 to $130,000.
“These actions demonstrate our commitment to rigorous enforcement of all types of violations in the municipal bond market,” said Andrew J. Ceresney, Director of the SEC’s Division of Enforcement. “We will act quickly and use all available tools to protect investors in municipal securities.”
LeeAnn G. Gaunt, Chief of the SEC’s Municipal Securities and Public Pensions Unit added, “These firms violated a straightforward investor protection rule that prohibits the sale of muni bonds in increments below a specified minimum. We conduct frequent surveillance of trading in the municipal bond market and will penalize abuses that threaten retail investors.”
The SEC’s orders against the 13 dealers find that in addition to violating MSRB Rule G-15(f) by executing sales below the minimum denomination, they violated Section 15B(c)(1) of the Securities Exchange Act of 1934, which prohibits violations of any MSRB rule. Without admitting or denying the findings, each of the firms agreed to be censured. They also agreed to review their policies and procedures and make any changes that are necessary to ensure proper compliance with MSRB Rule G-15(f).
The SEC’s investigation, which is continuing, is being conducted by Joseph Chimienti, Sue Curtin, Heidi M. Mitza, and Jonathon Wilcox with assistance from Kathleen B. Shields. The case is supervised by Kevin B. Currid and Mark R. Zehner. The SEC appreciates the assistance of the MSRB.
* * *
• Charles Schwab & Co. – $61,800
• Hapoalim Securities USA – $54,000
• Interactive Brokers LLC – $56,000
• Investment Professionals Inc. – $67,800
• J.P. Morgan Securities – $54,000
• Lebenthal & Co. – $54,000
• National Securities Corporation – $60,000
• Oppenheimer & Co. – $61,200
• Riedl First Securities Co. of Kansas – $130,000
• Stifel Nicolaus & Co. – $60,000
• TD Ameritrade – $100,800
• UBS Financial Services – $56,400
• Wedbush Securities Inc. – $67,200
So that should teach them a lesson eh!!!
But then, second, JPMorgan was forced to admit to some more market manipulation was beinmg investigated:
- *JPMORGAN: DOJ CONDUCTING CRIMINAL PROBE ON ITS FOREX TRADING
- *JPM FX TRADING BEING PROBED BY U.K. FINANCIAL CONDUCT AUTHORITY
- *JPM FX TRADING BEING PROBED BY U.S. BANKING REGULATORS, CFTC
- *JPM CITES CIVIL PROBES BY OTHER FOREIGN GOVERNMENT AUTHORITIES
- *JPMORGAN NOW SEES UP TO $5.9B POSSIBLE LEGAL LOSSES
- *JPM SAW UP TO $4.6B POSSIBLE LEGAL LOSSES IN JUNE 30 FILING
From JPMorgan's 10-Q: Foreign Exchange Investigations and Litigation.
DOJ is conducting a criminal investigation, and various regulatory and civil enforcement authorities, including U.S. banking regulators, the Commodity Futures Trading Commission (“CFTC”), the U.K. Financial Conduct Authority (the “FCA”) and other foreign government authorities, are conducting civil investigations, regarding the Firm’s foreign exchange ("FX") trading business.
These investigations are focused on the Firm's spot FX trading activities as well as controls applicable to those activities. The Firm continues to cooperate with these investigations and is currently engaged in discussions with DOJ, and various regulatory and civil enforcement authorities, about resolving their respective investigations with respect to the Firm. There is no assurance that such discussions will result in settlements.
Since November 2013, a number of class actions have been filed in the United States District Court for the Southern District of New York against a number of foreign exchange dealers, including the Firm, for alleged violations of federal and state antitrust laws and unjust enrichment based on an alleged conspiracy to manipulate foreign exchange rates reported on the WM/Reuters service. In March 2014, plaintiffs filed a consolidated amended class action complaint, which defendants moved to dismiss in May 2014.
When the bank that has a fortress balance sheet has 7 pages of double sided tiny print Litigation in its 10-Q, something is wrong!!
* * *
So back to the question at the start of the post… how much does it cost to keep JPMorgan FX-riggers out of jail? The answer is – at least $24,341 per employee (243,388 employees and a $5.9 billion allocation)
via Zero Hedge http://ift.tt/13BabkF Tyler Durden