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How Much Does It Cost To Keep JPMorgan FX-Riggers Out Of Jail?

Tyler Durden's picture




 

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)

 

 

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Mon, 11/03/2014 - 19:55 | 5408736 Theta_Burn
Theta_Burn's picture

Steaming turds, every last one of them...

 

Oh, and you to SEC & DOJ

Mon, 11/03/2014 - 19:57 | 5408739 Pinto Currency
Pinto Currency's picture

 

 

Wait until you see the penalty for destabilizing the U.S. with gold rigging.

Mon, 11/03/2014 - 19:58 | 5408747 Theta_Burn
Theta_Burn's picture

John Corzine says hello...

Mon, 11/03/2014 - 20:01 | 5408757 Pinto Currency
Pinto Currency's picture

 

 

The treason trials will also include J.Aron. & Co. / Goldman Sachs.

It will be years form now, but the trials will come.

Mon, 11/03/2014 - 20:09 | 5408775 Cacete de Ouro
Cacete de Ouro's picture

"Jacob Aron learned the commodities business from his uncle, a Chicago meatpacking agent. In 1898 he formed a partnership with his brother-in-law, Leon Israel, to import coffee into New Orleans. The partnership quickly dissolved, but J. Aron and Company lived on."

It sure did.....

J. Aron and Company: The Role of the Coffee Importer
http://www.crt.state.la.us/louisiana-state-museum/online-exhibits/coffee...

Mon, 11/03/2014 - 20:30 | 5408846 max2205
max2205's picture

Why don't the individuals get the money? Never mind

Mon, 11/03/2014 - 21:39 | 5409048 philipat
philipat's picture

Does this mean that CFTC will finally take action on PM manipulation or is that still under the protection of The Fed?

Mon, 11/03/2014 - 23:13 | 5409346 Spine01
Spine01's picture

Jacob Aron says: "By the time these fools realize what I did to them, and are able to get through my army of lawyers to start a trial, I will be long dead of old age... LOL"

Mon, 11/03/2014 - 19:58 | 5408741 OldPhart
OldPhart's picture

When did the SEC shut down the porn channels and maek their staff get to work?

Mon, 11/03/2014 - 20:14 | 5408798 Bangalore Equit...
Bangalore Equity Trader's picture

Listen Burn,

Don't forget those FBI maggots. Sure they will chase after petty criminals because they're easy.

Try their tribe masters who cheerfully spit on US law and the FBI runs the other way.

FBI is the biggest waste of American USSA tax money "EVER"!

Mon, 11/03/2014 - 23:37 | 5409417 Larry Dallas
Larry Dallas's picture

That's gonna hur bonuses!

Mon, 11/03/2014 - 19:57 | 5408742 Teamtc321
Teamtc321's picture

Hope, Hope and Change!!!..... Bitchezz!,

Mon, 11/03/2014 - 19:57 | 5408744 FieldingMellish
FieldingMellish's picture

Ongoing one-off costs.

Mon, 11/03/2014 - 20:02 | 5408745 ekm1
ekm1's picture

The dollar amount of the fines is irrelevant.

 

What is relevant is that JPM and bank lobby are no longer untouchable and are being hit by all sides, including removal of commodity control gradually

Mon, 11/03/2014 - 20:04 | 5408766 Bay of Pigs
Bay of Pigs's picture

Oh yeah? Did you miss the part about nobody going to jail?

Your schtick on this topic is getting very old.

Mon, 11/03/2014 - 20:10 | 5408783 ekm1
ekm1's picture

Nobody major will go to jail.

What they are doing is legal. It is theft and extortion, but congress, Fed and White House have legalized it.

That is the current reality. Legalized mafia.

Mon, 11/03/2014 - 23:19 | 5409362 Spine01
Spine01's picture

For as long as the incentives that drove this behavior are not changed, the behavior will repeat on a loop and the same events will happen again.

Imagine the bankers that knowing that Argentina could never repay their debt, lent it money in the 1990's to the tune of hundreds of billions of dollars to buy from their friend's companies staff that was not help the Country increase productivity, but that was going to fill the pockets of their friends.

They made tons of money in commissions that they are enjoying today while in retirement. And can care less of all the pain and suffering they are inflicting on the population and on the pension funds that failed due to their actions.

People are people and will remain being people in a thousand years. Incentives drive them. And the only way to change their behavior is to change their incentives and align them with societal benefits in the long term. Never ever in the short term as they are today.

Mon, 11/03/2014 - 19:59 | 5408749 NoDebt
NoDebt's picture

"SEC investigation, which is continuing, is being conducted by Joseph Chimienti, Sue Curtin, Heidi M. Mitza, and Jonathon Wilcox with assistance from Kathleen B. Shields"

Building dive, hot tub drowning, suspicious single vehicle accident in a Mercedes with the engine flying 100 yds. the other direction, suicide by hanging and nail gun.

In that order.

 

Mon, 11/03/2014 - 21:42 | 5409057 Hobo Sapien
Hobo Sapien's picture

Green.

But maybe not; check back in a year or two and see if the revolving door picks up speed.

Mon, 11/03/2014 - 20:04 | 5408769 Cacete de Ouro
Cacete de Ouro's picture

They spend far more than $24,000 per employee per annum on fixed costs such as desks, facilities, subsidized food, air-con, IT support, building running costs, so just another cost to add it, admittedly a biggish cost.

Mon, 11/03/2014 - 20:15 | 5408799 orangegeek
orangegeek's picture

jump jamie jump you cockroach!!!!

Mon, 11/03/2014 - 20:33 | 5408856 max2205
max2205's picture

Even Ebola wouldn't come near Jamie's stench filled body to finish him off.

Garlic? Stake? Cross?.....naaah

Mon, 11/03/2014 - 20:22 | 5408821 starman
starman's picture

Investors just love junk. Junk bonds junk food. Hey its a tradition!  

Life's good. 

Mon, 11/03/2014 - 20:34 | 5408860 Consuelo
Consuelo's picture

Keep eatin' that dirty snatch - it'll get ya...

Mon, 11/03/2014 - 20:45 | 5408878 docmac324
docmac324's picture

As long as corporations can insulate the individuals within, nothing will ever change.  Move along.

Mon, 11/03/2014 - 21:06 | 5408952 logicalman
logicalman's picture

Difference between the organized crime and government?

NONE.

 

Mon, 11/03/2014 - 21:28 | 5409019 Herdee
Herdee's picture

As the U.S. Government becomes even more hard up for tax dollars you can bet that with the help of the NSA bankers won't have a crooked leg to stand on.At least the Feds know that they can make lots and lots of bread going after true criminals.Banksters,if I were you,I'd cooperate and come forward and admit to whatever illegal activities you've been doing.Save your necks,because you can do a lot of hard time.Better to turn rat and save your skin.You can end up in some pretty bad places in the U.S. prison system if you make it difficult.If you're a bankster reading this and you don't believe me then you should check out the NSA facility in Utah.They know every keystroke,every telephone call and conversation along with the knowledge that comes from every video camera in our society.They will find you andwhen they do they'll know every detail about you and anybody you know.Government wants their fair share.(pound of flesh in bankster terms).Nobody feels sorry for banksters either so don't look for any sympathy being in the 1%.

Mon, 11/03/2014 - 21:39 | 5409049 Dragon HAwk
Dragon HAwk's picture

All that NSA computer Power and Not ONE banker or Politician charged with Treason..

 tells you all you need to Know folks...

Mon, 11/03/2014 - 21:42 | 5409053 Never One Roach
Never One Roach's picture

Total number of financial criminals behind bars = 1

It's a track record Eric "The Do Nothing" Holder can add to his resume.

Mon, 11/03/2014 - 23:23 | 5409340 williambanzai7
williambanzai7's picture

Throat cancer is not a nail gun

 

Tue, 11/04/2014 - 00:10 | 5409469 Fuku Ben
Fuku Ben's picture

Stress is good for cancer, right?

Tue, 11/04/2014 - 01:36 | 5409621 Emergcy
Emergcy's picture

This all what SEC is doing is a joke. Why can one get free by paying money? How much does it cost to keep a murder out of jail? Unless they have to pay real painful fines in amount which hurts them (they earn by crime 100 and then they get charged by 5; it is just to keep public believing in justice, what a joke) and the bosses have to go to jail, it will not stop. Fines are just a part of the game. The whole system is corrupted.

Tue, 11/04/2014 - 04:42 | 5409747 Jano
Jano's picture

a fool & moron everybody, who tries to play at Wall Street sand box with guys, like JPM. Or a better term would be : sponsor of FED.

Tue, 11/04/2014 - 08:08 | 5409879 Panic Mode
Panic Mode's picture

Check the chinese media to see how many bankers they have thrown to jail. US justice is a truman show, so ugly to the point that is funny. 

Tue, 11/04/2014 - 08:25 | 5409905 Ban KKiller
Ban KKiller's picture

Keep paying those fire insurance premiums in Greenwich.

Tue, 11/04/2014 - 09:22 | 5410041 wearef_ckedwith...
wearef_ckedwithnohope's picture

Speaking of criminals:

Amongst all the political candidate signs in the heaviest traffic spot in my town is a singualr, handmade one that says:

" FREE JON CORZINE !!  (Oops) ".  It's mine. 

Do NOT follow this link or you will be banned from the site!