User:Rjlabs/2012 JPMorgan Chase trading loss

151:. Heavy opposing bets to his positions had been made by traders, including another branch of JPMorgan, who purchased the derivatives that JPMorgan was selling in such high volume. Early reports were denied and minimized by the firm in an attempt to minimize exposure. Major losses of $ 2 billion were reported by the firm in May 2012 in relationship to these trades; on July 13, 2012, the total loss was updated to $ 5.8 billion with the addition of a $ 4.4 billion loss in the second quarter and recalculation of a loss of $ 1.4 billion for the first quarter. A spokesman for the firm projected total losses could be more than $ 7 billion. The disclosure, which resulted in headlines in the media, did not disclose the exact nature of the trading involved, which remained in progress as of May 16, 2012 as JPMorgan's losses mounted and other traders sought to profit or avoid losses resulting from JPMorgan's positions. As of June 28, 2012 JPMorgan's positions were continuing to produce losses which could total as much as $ 9 billion under worst case scenarios. The trades were possibly related to CDX IG 9, a credit default swap index based on the default risk of major U.S. corporations that has been described as a "derivative of a derivative". On the company's emergency conference call, JPMorgan Chase CEO Jamie Dimon said the strategy was "flawed, complex, poorly reviewed, poorly executed, and poorly monitored". The episode is being investigated by the Federal Reserve, the SEC, and the FBI. 3534:“It makes me so mad to think back how ignorant, arrogant, and dismissive she was with people who knew what they were talking about pre-crisis,” one former Fed colleague told The Institutional Risk Analytics. Dahlgren was running the AIG show for the FRBNY. She ignored the recommendations from the Fed’s own advisors and the Board of the FRBNY that AIG counterparties be forced to take haircuts. For her to ignore good advice on AIG and then deliberately take steps to hide that decision from the Congress and the public, and then be rewarded with a promotion, is quite disheartening.” 160:

degree which seemed to diverge from market expectations. It turned out that JPMorgan was shorting the index by making huge trades. JPMorgan's bet was that credit markets would strengthen; the index is based on 121 investment grade bonds issued by North American corporations. Investors who followed Weinstein's tip did poorly during the early months of 2012 as JPMorgan strongly supported its position. However by May after investors became concerned about the implications of the

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system of controls reasonably designed to safeguard the assets and income of the Firm, assure the integrity of the Firm’s financial statements, assure compliance with the Firm’s operational risk management processes, and maintain compliance with the Firm’s ethical standards, policies, plans and procedures, and with laws and regulations. The Board of Directors has determined that Mr. Bell, Ms. Bowles and Mr. Jackson are audit committee financial experts as defined by the SEC.

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June for several hundred senior leaders of the firm who regularly interact with regulators. We discussed our culture of transparency, stressing the necessity of fully and accurately reporting material issues to our regulators in a timely manner and responding promptly to their requests.These efforts come on top of our regular bi-weekly meetings with the FRB, OCC, FDIC and others—in the U.S. and around the world—to review progress and address open issues.

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business risk committees and chief risk officers to manage risk. The Risk Management function is headed by the Firm’s Chief Risk Officer, who is a member of the Firm’s Operating Committee and who reports to the Chief Executive Officer and is accountable to the Board of Directors, primarily through the Board’s Risk Policy Committee. The Chief Risk Officer is also a member of the line of business risk committees.

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balance-sheet risks. She earned more than $ 15 million in each of the last two years." Her reported compensation for 2011 was $ 14 million. In 1993, she was profiled as one of Crain's New York "40 under 40." She was CIO of JP Morgan Chase & Co. since February 2005. "Prior to that she was Head of Global Treasury . She earned a master's degree in international economics from the

1255:"flawed, complex, poorly conceived, poorly vetted and poorly executed ... This should never have happened ... I can't justify it. Unfortunately, these mistakes were self-inflicted ... However, we also understand the need for rules and practices to ensure that hedging doesn't morph into something different. What this hedge morphed into violates our own principles." 4177:

shareholders. The Senate report concluded that those misrepresentations occurred. The SEC says it’s still investigating individuals in this case. Maybe we’ll see more enforcement action on how the bank communicated with investors. A firm is required by law not only to stay on top of its finances, but also to tell the truth about its finances to the investing public.

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information not to be necessarily indicative of future operating performance or of future financial condition. This provision would mandate disclosure, for example, if a company was experiencing trading losses that are different from past experience, and, as a result, its current year results are likely to be materially adversely impacted compared

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the credit derivatives trading practices conducted by the CIO: inadequate oversight and governance to protect the bank from material risk, inadequate risk management processes and procedures, inadequate control over pricing of trades, inadequate development and implementation of models used by the bank, and inadequate internal audit processes.

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OCC because he believed that the regulators did not need the information. He, in fact, reacted angrily when the bank’s CFO, Douglas Braunstein, resumed sending the information to regulators. Even the powerful CEO of one of our nation’s largest banks does not get to make his own rules and decide which regulations are worthy of compliance.

58:. Content will evolve and be edited until the entire process is concluded, including examining the ultimate follow-through, compliance, and actual changed behavior, based on what becomes legally ordered. Presented here in organized bullet outline format only, as and when reliable information becomes first available. See 4157:

their financial statements are reliable, and ensure that senior management shares important information with key internal decision makers such as the board of directors. JPMorgan failed to adhere to these requirements, and consequently misstated its financial results in public filings for the first quarter of 2012.

2428:“Last fall’s proposed rule ignored the clear legislative language and clear statement of congressional intent and allowed for so-called ‘portfolio hedging,’ ... Now, in recent days, we’ve seen exactly what ‘portfolio hedging’ might mean. This ’JPMorgan Loophole’ is big enough to drive a ’London Whale’ through.” 2928:"The Financial Services Committee will hold a hearing on the public policy implications of this trading loss, but we will not rush into a hearing simply to chase headlines. This will give the committee and the regulators time to gather all the facts, do our homework and then have a serious hearing on this subject." 4555:“When the scale of the problems at JPMorgan became apparent, it sent a shock-wave through the markets. Maintaining the integrity of markets is a key part of our wholesale conduct agenda. We consider JPMorgan’s failings to be extremely serious such as to undermine the trust and confidence in UK financial markets. 4581:

The firm’s senior management gave insufficient weight to inconsistencies raised in the information in its possession, especially in light of the context provided by the scale of the losses in the SCP. Firm senior management did not take sufficient steps to ensure that all crucial information reached

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The agency is pushing JPMorgan to admit that the London trading manipulated a corner of the derivatives market — an accusation that it disputes and one that it is fighting tooth and nail. Such an admission could set a precedent that threatens some of the bank’s current trading businesses. But without

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the nation’s commodities trading regulator, which is investigating whether the London losses manipulated the market, warned that it intended to file an enforcement action against the bank after settlement talks broke down. The agency wanted a $ 100 million fine, people briefed on the matter said, and

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Generally accepted account principles for derivatives and hedging will be examined in depth. The financial statements notes and disclosures in this area have highly specific requirements, as determined by the Financial Accounting Standards Board. JPMs annual financial statement was audited by outside

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69 Id. at 449 (holding that “n omitted fact is material if there is a substantial likelihood that a reasonable shareholder would consider it important in deciding how to vote”); see also SEC Staff Accounting Bulletin No. 99, 64 Fed. Reg. 45150 (Aug. 19, 1999) (stating that misstatements that have the

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The size of the penalties is testimony to the great damage risky derivatives bets can do, and that’s important. However, the whole issue of misinforming investors and the public is conspicuously absent from the SEC findings and settlement. Our PSI investigation showed that senior bank executives made

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The Firm’s risk management is described in the Management Discussion and Analysis of the 2011 Annual Report starting at page 125. As stated there, risk is an inherent part of JPMorgan Chase’s business activities and the Firm’s overall risk appetite is established in the context of the Firm’s capital,

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JPMorgan also failed to meet its obligations in respect of its relationship with the FCA*. During the first half of 2012, JPMorgan failed to be open and co-operative with the FCA in that it concealed the extent of the losses as well as numerous serious and significant issues regarding the situation

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The OCC participates in interagency activities in order to maintain the sanctity of the national banking system. By monitoring capital, asset quality, management, earnings, liquidity, sensitivity to market risk, information technology, consumer compliance, and community reinvestment, the OCC is able

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The OCC found that the bank’s controls failed to identify and prevent certain credit derivatives trading conducted by the CIO that resulted in substantial loss to the bank, which has exceeded $ 6 billion. The OCC has conducted several targeted exams which found the following deficiencies related to

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Requires things such as a special compliance committee of Board, officer assigned to submit all reports, plan with timelines (60 days), progress plan (90 days), independent consultant, formal audit (track remediation efforts, evaluate and test new internal controls, insure prompt management response

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Halt an activity (cease) and do not take it up again later (desist) or else face additional, presumably strong, legal action. For example, in 2012 a $ 500 million civil penalty was assessed by OCC against HSBC Bank based on violations of the Bank Secrecy Act. The fine was substantial. Just two years

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of all the people who are regulating the activities. And so I see Mr. Curry says he has people, 65 people on location. These are not regular people. These are people with 20 or more years of experience, skills in key risk areas, teams of PhD economists. He then identifies in the next paragraph - the

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Secondly, the OCC examination team initiated a more rigorous examination of the CIO and related controls through its on-site supervision team. That team conducted reviews of the “level of risk, the quality of risk management, audit coverage, model control processes, regulatory capital reporting, and

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We have also taken tangible steps to improve our oversight of outside vendors. If a vendor or partner engages with our customers, we need to be as vigilant about their practices as we are about our own, particularly if they interact directly with customers. We are also proactively trying to decrease

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On the business side, we have been asking our senior people to eliminate products and services that are not essential to serving our customers and are not core to our business. We recently announced that we will be exiting the student lending origination business and most of the physical commodities

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the broker or dealer will use to backtest the mathematical model used to calculate maximum potential exposure; a description of how each mathematical model satisfies the applicable qualitative and quantitative requirements set forth in paragraph (d) of this Appendix E; and a statement describing the

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Detailed investigations by several, highly diverse, regulatory entities are non-public and frequently take months-to-years to complete. Extensive private negotiations are then often held with the firm based on those extensive investigations. Public legal processes typically follow after that and are

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This is yet another example of a firm failing to get a proper grip on the risks its business poses to the market. There were basic failings in the operation of fundamental controls over a high risk part of the business. Senior management failed to respond properly to warning signals that there were

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JPMorgan’s senior management broke a cardinal rule of corporate governance: inform your board of directors of matters that call into question the truth of what the company is disclosing to investors. Here, at the very moment JPMorgan’s management was grappling with how to fix its internal control

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Disclosure is required on an annual basis about market risk as of the end of the company’s fiscal year ... calls for qualitative disclosure about the company’s primary market risk exposures and how the company manages such market risks ... Like the quantitative disclosure, this disclosure

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In May and June, I held town halls for the Office of the Comptroller of the Currency (OCC), Federal Reserve Board (FRB) and Federal Deposit Insurance Corporation (FDIC) Examiners in Charge and their teams. I personally meet with our banking examiners on a regular basis. I also hosted a town hall in

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We will have increased the number of employees dedicated to our control efforts (Risk, Compliance, Legal, Finance, Technology, Oversight & Control and Audit) across the entire firm by 4,000 employees since the beginning of 2012 (including adding 3,000 in 2013 alone). We have increased our total

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We are conducting an in-depth review of our foreign correspondent banking business. While we will continue to focus on serving our clients properly around the world, we will strengthen our controls—particularly around "Know Your Customer" and transaction monitoring—to better protect our company and

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As the Subcommittee’s investigation revealed, top management at JPMorgan felt entitled to decide for itself what information to release to the bank’s regulators. At one point in August 2011, CEO Jamie Dimon ordered that the investment bank withhold daily profit and loss (P&L) reports from the

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the Sarbanes-Oxley Act of 2002 established important requirements for public companies and their management regarding corporate governance and disclosure. Public companies such as JPMorgan are required to create and maintain internal controls that provide investors with reasonable assurances that

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The FRB NY Chairman is the second most powerful position in the Federal Reserve under the general Chairman. They operate as "second in command" at the Federal Open Market Committee FOMC in setting interest rates in the U.S. FRB NY implements the decisions of the FOMC in the actual marketplace on a

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Going back in time now and remembering the period before the crisis, Dahlgren typified the arrogance and refusal of Fed officials to acknowledge warnings from various members of the financial community that the subprime mortgage market was melting down after years of unsafe and unsound lending and

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Appointment is necessary and appropriate under the applicable statue and regulations because (1) a criminal investigation of the mater is warranted, (2) an investigation by the Department of Justice "would present a conflict of interest for the Department or other extraordinary circumstances," and

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The trades occurred within the Chief Investment Office (CIO), where staff were reportedly "faithfully executing strategies demanded by the bank's risk management model". This unit is reported to have very wild latitude in otherwise unsupervised trading. The company had been without a treasurer for

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magazine. After "the disastrous $ 2 billion trading loss related to derivatives in the bank's chief investment office in London" became known in May 2012, he was "stripped of his trading responsibilities." In August 2013 he was reported to be a cooperating witness for the government in a criminal

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The Audit Committee is responsible for oversight of guidelines and policies that govern the process by which risk assessment and management is undertaken. In addition, the Audit Committee reviews with management the system of internal controls that is relied upon to provide reasonable assurance of

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Section 252.126 Fed rule requires banks “have at least one member with risk management expertise that is commensurate with the company’s capital structure, risk profile, complexity, activities, size and other appropriate risk factors.” Further, the NPR defines risk management expertise as follows:

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On February 2, 2012 at the Harbor Investment Conference, speaking to an audience of investors, Boaz Weinstein recommended buying the Markit CDX North America Investment Grade Series 9 10-Year Index, CDX IG 9. This was a derivative which Weinstein had noticed to be losing value in a manner and to a

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The Division of Banking Supervision and Regulation is responsible for the oversight of U.S. banking holding companies, foreign banking organizations operating in the U.S., and state-chartered member banks of the Federal Reserve System. The Division develops and implements safety and soundness and

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The Subcommittee will examine matters relating to credit derivative trades made by the JPMorgan Chase Chief Investment Office. The Subcommittee expects to issue a Subcommittee staff report in conjunction with the hearing summarizing its investigative findings and recommendations. Witnesses will

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In late 2011, Martin-Artajo and Iksil (see key people) were directed by executives to reduce a large position. They partially complied by selling more than $ 70 billion of derivatives. This new position only partially offset the risk of the first position, and went further in creating a large new

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72 Id. at 238–39 (quoting SEC v. Texas Gulf Sulphur Co., 401 F.2d 833, 849 (2nd Cir.1968)) (holding that where information or events are speculative, such as in the merger negotiation context, materiality “‘will depend at any given time upon a balancing of both the indicated probability that the

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Thomas Curry (OCC) - We operate the supervision policy where we have a resident examiner in charge of the institution. That individual will allocates responsibility for individuals to examine into particular areas of the bank. That can change over time. It can also be the result of someone being

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and was forced to resign after the company suffered a trading loss of $ 2 billion in April/May 2012. She was one of very few high ranking female executives on Wall Street. "Until the loss was disclosed late Thursday , Drew was considered by some market participants as one of the best managers of

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provides oversight of the independent registered public accounting firm’s qualifications and independence; the performance of the internal audit function and that of the independent registered public accounting firm; and management’s responsibilities to assure that there is in place an effective

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The Federal Reserve Board issued detailed guidance to supervised banking companies maintaining significant trading accounts in 2009. SR 09-01 details modeling requirements for VaR models and changes to VaR models. It also requires formal approval of regulatory VaR models and changes. It is not

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the situation reversed and JPMorgan suffered large losses. In addition to Weinstein's Saba Capital Management, Blue Mountain Capital, BlueCrest Capital, Lucidus Capital Partners, CQS, and III are hedge funds which are known to have benefited from taking the other side of the trade to JPMorgan. A

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The Office of the Comptroller of the Currency and the Federal Reserve already have legions of staff posted permanently in the nation’s largest banks with authority to halt any practice they deem “unsafe and unsound”. If the supervisors didn’t react to JPMorgan’s whale, there is little reason to

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available.” Further, in Basic Inc. v. Levinson,70 the Supreme Court adopted the TSC Industries standard of materiality for the anti-fraud context,71 and applied a “probability/magnitude” balancing approach to determine materiality in the case of contingent or speculative information or events.72

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Studying or investigating all other aspects of crime and lawlessness within the United States which have an impact upon or affect the national health, welfare, and safety including but not limited to investment fraud schemes, commodity and security fraud, computer fraud, and the use of offshore

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We have 500 dedicated professionals and several thousand others contributing significantly to the resubmission of the Federal Reserve's capital stress test or Comprehensive Capital Analysis and Review (CCAR). These individuals working together developed and reviewed more than 100 new models and

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The Board of Directors exercises its oversight of risk management, principally through the Board’s Risk Policy Committee and Audit Committee. The Risk Policy Committee oversees senior management risk-related responsibilities, including reviewing management policies and performance against these

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The SEC’s number one job is looking out for investors, including pensions, mutual funds and small, individual investors. While the settlement includes penalties for internal control failures, I’m concerned that it doesn’t focus more on the firm’s reported misrepresentations to the public and

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Risk Management operates independently of the lines of businesses to provide oversight of firmwide risk management and controls, and is viewed as a partner in achieving appropriate business objectives. Risk Management coordinates and communicates with each line of business through the line of

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The general standard of materiality, set forth in TSC Industries, Inc. v. Northway, Inc.,68 is whether there is a “substantial likelihood that the disclosure of omitted fact would have been viewed by the reasonable investor as having significantly altered the ‘total mix’ of information made

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requires a discussion of known trends, events, demands, commitments, and uncertainties that are reasonably likely to have a material effect on financial condition or operating performance ... This disclosure should highlight issues that are reasonably likely to cause reported financial

127:, accumulated outsized CDS positions in the market. An estimated trading loss of $ 2 billion was announced, with the actual loss expected to be substantially larger. These events gave rise to a number of investigations to examine the firm's risk management systems and internal controls. 1061:

provides oversight of the CEO’s and senior management’s responsibilities to assess and manage the Firm’s credit risk, market risk, interest rate risk, investment risk, liquidity risk, and reputational risk, and is also responsible for review of the Firm’s fiduciary and asset management

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The $ 200 million penalty against JPMorgan is unprecedented for an internal controls case and is one of the largest penalties in the history of the SEC. The penalty reflects the SEC’s assessment of the gravity of the control failures and the risks to which they exposed the firm and

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At one point, Ms. Duersten called one trader into her office at the New York headquarters and told him that he would report to her, instead of to Mr. Macris. The trader said, “Achilles hit the roof” upon hearing of the meeting. The trader added that he “didn’t know who to listen

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the appropriate decision makers; findings made by Internal Audit were not escalated to senior management and therefore not considered as part of the review. In addition, the firm’s senior management did not involve key parts of the firm’s overall control framework in the review.

2696:: We have gone into the concerns about the whale trades all day long, and the OCC has a list of its own concerns, and you have indicated those concerns in six supervisory letters, and a cease and desist order which you have issued with respect to JPMorgan, and I'd like to ask 827:

The Firm’s risk governance structure starts with each line of business being responsible for managing its own risks, with its own risk committee and a chief risk officer. Overlaying the line of business risk management are four corporate functions with risk management-related

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the firm’s response to breaches of relevant risk limits was to assume the numbers indicating a breach were unreliable or to doubt the accuracy of the methodology for risk measurement, and to approve temporary limit increases without adequate analysis of the root cause of the

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The trading losses occurred against a backdrop of woefully deficient accounting controls in the CIO, including spreadsheet miscalculations that caused large valuation errors and the use of subjective valuation techniques that made it easier for the traders to mismark the CIO

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In some prior accounting periods JPM recognized a large future legal expense for its retail business operations ($ 1.5b). A charge against income was made (reducing reported income) and a liability was established on the balance sheet for the estimated costs to settle those

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Banks sometimes refine their value-at-risk, or VaR, models but those commonplace changes do not by themselves produce such dramatically different results, said Christopher Finger, one of the founders of RiskMetrics Group, which pioneered VaR models and is now a unit of MSCI

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Mike Cavanagh, CEO Treasury & Securities Services will coordinate the firmwide response to the recent losses ... largely dedicated to this project for the near future. Previously CFO the firm. This group will have about 24 members spanning the following functions:

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In addition to the information expressly required to be included in a statement or report, there shall be added such further material information, if any, as may be necessary to make the required statements, in the light of the circumstances under which they are made not

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CIOs activities were asserted to merely to protect the firm's long-term capital. The investment horizon was long-term, over entire economic cycles. The activity concentrated on interest rates and foreign currency risks. As such the activities were not to be deemed prop

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The Group filed a statement of its earnings in the US on 10 May 2012 which over-valued the SCP’s positions. It subsequently filed a restatement on 13 July 2012. More effective analysis of the information available as at 10 May 2012 may have prevented the need for this

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Finding section of the report is nearly complete, but the recommended policy changes, focusing on stricter public disclosures, is currently subject to ongoing partisan debate. Levine and staff are leading the democratic side with McCain and staff leading the republican

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The $ 2B loss came from three positions which partially offset each other. It occurred when the world's financial markets were in relative calm. Had quality spread curves twisted or worldwide economic distress been more pronounced the loss could have been much higher.

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a series of inaccurate statements that misinformed investors and the public as the London Whale disaster unfolded. Other civil and criminal proceedings apart from this settlement are continuing, so there is still time to determine any accountability on that matter.

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Simultaneous to the above JPM will recognize legal expenses related to the Whale trades that are substantially higher than have been estimated to date. Absent the above "reversal" transaction, this second transaction would result in a large reduction to current

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Is the agency responsible for investigating and prosecuting acts of misconduct committed by institution-affiliated parties of national banks, including officers, directors, employees, agents and independent contractors (including appraisers, attorneys and

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on the Pacer system (.10 per page, max $ 3/document, up to $ 15 free usage per quarter. From login: NY Southern > Document Filing System > * Query > Search on case number > check which case / cases to search > search > History/Documents

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to have a material adverse effect on the registrant, discuss the registrant's policies and practices of compensating its employees, including non-executive officers, as they relate to risk management practices and risk-taking incentives ... (more at

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The agency responsible for investigating and prosecuting acts of misconduct committed by institution-affiliated parties of national banks, including officers, directors, employees, agents and independent contractors (including appraisers, attorneys and

4381:"requiring the largest U.S. bank to fix internal risk controls that contributed to its wrong-way bet on credit derivatives". According to Jamie Diamond, CEO, the environment around the derivative trades involved “errors, sloppiness and bad judgment.” 4127:

the SEC required JPMorgan to admit the facts in the SEC’s order – and acknowledge that it broke the law – because JPMorgan’s egregious breakdowns in controls and governance put its millions of shareholders at risk and resulted in inaccurate public

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CPAs. After an extensive and expensive audit those CPAs opined that the financial statement was in conformance with GAAP. This means that they too will share some responsibility for any departures from GAAP should have been caught during the audit.

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make key governance documents, such as such as board of director bylaws, committee charters and membership, and Federal Reserve Board director eligibility policy and ethics policy, available on their websites or otherwise easily accessible to the

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We are the consolidated supervisor. We supervise the unregulated portions of the holding company and its roll up of its consolidated activities but the specific activities in the national bank, those 65 examiners you are talking about I’m afraid

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JPMorgan’s traders sought to conceal them by mismarking positions and through misconduct in the market in which the losses were occurring. Mismarking went undetected in 2012 owing to flaws in valuation controls, some of which had existed since

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The Risk Policy Committee is responsible for oversight of the CEO's and senior management's responsibilities to assess and manage the corporation's credit risk, market risk, interest rate risk, investment risk, liquidity risk and reputational

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The CEO is responsible for setting the overall risk appetite for the Firm, and the line of business (“LOB”) CEOs are responsible for setting the risk appetite for their respective LOBs subject to approval by the CEO and the Firm’s Chief Risk

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Even though everyone in the meeting was in agreement on what to do, the London office put on new trades that appeared to be at odds with the strategy ... Mr. Weiland was among those who became aware that the plan hadn't been followed

1724:" Martin-Artajo is deeply disappointed by the bank's unjustified assertion that he may have attempted to conceal the losses being suffered by the book ... There was no direct or indirect attempt by him at any time to conceal losses" 1537:

Late , Mr. Weiland was replaced as the unit's head of risk by Irvin Goldman, a former trader who had no experience as a risk manager and happened to be the brother-in-law of Mr. Zubrow, the bank's chief risk officer until early January.

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problems in the CIO. As things began to go wrong, the firm didn’t wake up quickly enough to the size and the scale of the problems. What is worse, they compounded this by failing to be open and co-operative with us as their regulator.

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Studying or investigating the compliance or noncompliance of corporations, companies, or individual or other entities with the rules, regulations, and laws governing the various governmental agencies and their relationships with the

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Testimony in front of Senate June 13 did not reveal much about the actual trading losses, people involved, timing, systems in place, size of positions taken, etc. Washington Post provided a very good overview of some of the politics

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for market and derivatives-related credit risk. A brokerdealer using the alternative method of computing net capital is subject to enhanced net capital, early warning, recordkeeping, reporting, and certain other requirements, and

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Levin and Merkely wrote on May 17, 2012 a letter to FRB, SEC, OCC, CFTC and FDIC regulators to insist that law as enacted be implemented into detailed regulations. It specifically references these trading losses as prop trading.

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exposure. The new exposure (above position #2) was a bet on the strength of a group of companies. JPM sold a massive amount of insurance that companies contained in that specified group, for a period of time, would not default.

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The VaR models used to calculate deductions for market and credit risk be the same models used to report market and credit risk to the firm’s senior management and be integrated into the internal risk management system of the

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Did the SEC consider requiring admissions of wrongdoing on the part of any individuals within the bank as part of the settlement negotiations? What factors led to the decision to not address individual misconduct in today’s

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The consent Order of Assessment of a Civil Money Penalty against JPMC cites the failure by JPMC to appropriately inform its board of directors and the Federal Reserve of deficiencies in risk-management systems identified by

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The bank may now be calling the positions an "economic hedge" but, in hindsight, they look to me like a series of trades designed to generate income that spiraled out of control on incorrect or ignored risk information and

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the subcommittee is permanent, with Senators running for office only once every six years. They have "the resources and the appetite for spending months or years issuing subpoenas, interviewing witnesses and poring over

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As a result of the findings of certain internal reviews of the CIO, some executives expressed reservations about signing sub-certifications supporting the CEO and CFO certifications required under the Sarbanes-Oxley

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Last month, when we filed fraud charges against JPMorgan’s former traders, Javier Martin-Artajo and Julien Grout, we said these traders exploited massive shortcomings in JPMorgan’s internal controls infrastructure.

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I believe that the government must hold accountable those individuals who compromised the integrity of our nation’s financial markets. The government’s incomplete enforcement actions to date fail to achieve that

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hat is, the number of business days in the past 250 business days, or other period as may be appropriate for the first year of its use, for which the actual net trading loss, if any, exceeds the corresponding VaR

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JPMorgan agreed to settle at an early stage of the FCA’s investigation. JPMorgan therefore qualified for a 30% discount under the FCA’s settlement discount scheme. Without the discount the fine would have been

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This area was discussed prior by the SEC in the prior Senate Hearing. See above on Risk Management disclosures in the Proxy statement, Risk Committee of the Board of Directors, and Executive Compensation 17 CFR

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Mary Miller, Treasury’s undersecretary for domestic finance, and Martin Gruenberg, acting chairman of the Federal Deposit Insurance Corp., have said regulators aim to complete the Volcker rule by the end of the

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for the affiliate group as though it were an OTC derivatives dealer with respect to all of its business activities, except that paragraphs (c)(5)(xiii), (c)(5)(xiv), (d)(8), and (d)(9) of Rule 15c3-4 shall not

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investigation exposed, among other things, that top management at JPMorgan was aware of the risky trading positions, but defied oversight by actively withholding information from the Bank’s regulators and the

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The two transactions, each timed to occur in exactly the same accounting quarter, will mean that income is smoothed out, and future five year results charts will show a more linear (vs. sawtooth) income trend

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During a CIO management meeting late that included Ms. Drew, Mr. Macris and Mr. Weiland, the group discussed the size of the credit positions. They agreed that the positions needed to be reduced over time.

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On a conference call with analysts on Friday, Mr. Dimon said that the trade could result in another $ 1.7 billion in losses in the future, but added that the estimate was considering a worst-case situation.

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Federal policy prohibits White and the SEC’s co-director of enforcement, Andrew Ceresney, from weighing in because both had represented JPMorgan in the past year, when they were partners at the law firm of

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Braunstein (CEO) informed investors on an earnings conference call that the bank was “very comfortable with our positions.” The senate report investigates in some detail if those disclosures were in fact

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One of six people who have hired attorneys, all but Weiland have either been fired by the bank or left on their own accord. He resigned in October 2012, according to the JPMorgan Chase Task Force Report.

831:

Risk Management operates independently to provide oversight of firmwide risk management and controls, and is headed by the Firm’s Chief Risk Officer, who is a member of the Firm’s Operating Committee and

4550:

JPM to pay 137,610,000 pounds (approximately $ 220,000,000) fine to Financial Conduct Authority 9-19-2013 Director of enforcement for Britain’s Financial Conduct Authority, Tracey McDermott statement:

3450:

A request was made to the Attorney General by BetterMarkets.com, a watchdog group in Washington D.C., that a Special Council be appointed to independently oversee the Department of Justice investigation.

4265:

Rule 180.2 codifies Section 6(c)(3) of the Commodity Exchange Act- unlawful for any person directly or indirectly to manipulate or attempt to manipulate the price of any swap or commodity in interstate

2009:

across various informed sources including: FASB, SEC, FRB, OCC, FDIC etc. For example, note that the SEC asked the FASB to review accounting for hedging derivatives when counterparties change See also

1534:

Mr. Weiland had begun a review of the CIO's risk limits and participated in a discussion about whether restrictions needed to be tighter and more specific ... But new limits were never agreed to

276:

The Financial Times "Alphaville" analysis suggests that these positions were not volatile enough to account for the full losses reported. They suggest that other positions are likely involved as well.

2627:: Mr. Curry you took office as Comptroller not even a year ago, just as these whale trade stories broke and since then the OCC has conducted an intense review of the whale trades. Were you surprised 2168: 362:

Source: 17 CFR Parts 200 and 240 Alternative Net Capital Requirements for Broker-Dealers That Are Part of Consolidated Supervised Entities; Supervised Investment Bank Holding Companies; Final Rules

335:

http://www.corpgov.deloitte.com/binary/com.epicentric.contentmanagement.servlet.ContentDeliveryServlet/IreEng/Page%20Copy/Home/Risk%20Committee%20Resource%20Guide%20for%20Boards_Deloitte_010412.pdf

874:

The Audit Committee reviews with management the system of internal controls that is relied upon to provide reasonable assurance of compliance with the Firm’s operational risk management processes.

590:(which may be performed by internal audit staff) and annual reviews (which must be conducted by independent certified public accountants) of the OTC derivatives dealer's risk management systems; 2275:

We have built a state-of-the art control room in our corporate headquarters to provide streamlined data analysis and reporting capabilities of control and operational risk data across the firm.

439:

to be used to price positions and to compute deductions for market risk, including those portions of the deductions attributable to specific risk, if applicable, and deductions for credit risk;

115:

In April and May 2012, large trading losses occurred at JPMorgan's Chief Investment Office, based on transactions booked through its London branch. The unit was run by Chief Investment Officer

4094:

While SEC Commissioner Mary Jo White has aggressively pushed for an admission of wrongdoing in some civil cases, she did not take part in the JPMorgan deal, people familiar with the case said.

691:

Procedures are in place to authorize specified employees to commit the OTC derivatives dealer to particular types of transactions, to specify any quantitative limits on such authority, and to

3061:

Derivatives would be a key risk; they are very, very problematic. So, my question is with these 65 regulators on site, would you know the name of the one who monitors trading of derivatives?

1730:

It was announced August 9, 2013, that federal authorities plan to arrest Martin-Artajo in London. He and Julien Grout, a low level trader, are the two persons charged in the initial round of

3184:

The investigation should be that you are talking to your people who were on location and finding out if they are doing their job or sitting there with their feet on the desk drinking coffee.

1570:

At Bankers Trust, where he was a currency trader in the 1990s, he was asked to resign because of concerns that he wouldn't get along with a new boss, said two people familiar with the events

877:

The Compensation Committee is responsible for reviewing the Firm’s compensation practices and the relationship among risk, risk management and compensation in light of the Firm’s objectives.

3207:

Curry (OCC) - I understand Congressman that’s part of our review process is to do a post mortem to see what went wrong in this particular case, and how the OCC can better perform its duties

3127:

The SEC and CFTC, were sitting there with MF Global, while they were taking money out of customer accounts! They weren’t watching! They weren’t saying a word! They weren’t raising an alarm!

726:

Experience developing and applying risk management practices and procedures, measuring and identifying risks, and monitoring and testing risk controls with respect to banking organizations

1523:

Peter Weiland, then the chief risk officer of the CIO, and some more junior executives became concerned that if J.P. Morgan chose to sell the positions, the bank might suffer deep losses

4007:

Chief Financial Officer Marianne Lake told investors last week that the quarter’s addition to legal reserves would “more than offset” about $ 1.5 billion of consumer reserve releases."

2268:

For example, we have dedicated more than $ 750 million to address several of our consent orders and assigned close to 5,000 people to ensure we meet or exceed all that is expected of us.

870:

The Risk Policy Committee oversees senior management risk-related responsibilities, including reviewing management policies and performance against these policies and related benchmarks.

6831: 2246:

Adjusting to the new regulatory environment will require an enormous amount of time, effort and resources. We fully intend to follow the letter and spirit of every rule and requirement.

1507:

Reportedly Cantor Fitzgerald was fined $ 250k when he day-traded the same securities in both his personal and proprietary equities trading accounts. Hearing Board Decision: 10-ARCA-01

790:

The Firm’s risk management framework and governance structure are intended to provide comprehensive controls and ongoing management of the major risks taken in its business activities.

3511: 6006:"US prosecutors charge two JP Morgan traders over 'London Whale' incident: Two bankers accused of 'creatively cooking books', with further charges over $ 6bn scandal not ruled out" 5367: 3116:

my point is, we’ve got 65 gee-whiz people. I mean these are top-notch people according to your testimony. We have this stuff going on! They’re on the site in order to pay attention

467:

extent to which each mathematical model used to compute deductions for market and credit risk will be used as part of the risk analyses and reports presented to senior management;

2282:

In the weeks and months ahead, members of the Operating Committee and I will provide periodic updates to you about our progress towards creating a best-in-class operating system.

1089:

Certain directors were briefed then on a foreign-exchange-options bet that went bad, and were told that the trader responsible wouldn't be allowed to go overboard in the future"

7428: 6814: 5848: 4168:

Senior management failed to adequately update the audit committee on these and other important facts concerning the CIO before the firm filed its first quarter report for 2012.

3120:

we are concerned with the changes in the portfolio, during that period of time. What are they doing? Are they sitting here watching? That’s what they were supposed to be doing!

7517: 4021:

Due to the "serendipitous" release of the prior retail legal reserve, the current recognition of greatly increased expenses related to the Whale trades, will not result in a

1093:

August 2012 - Timothy Flynn assigned to the risk committee. Cote expected to step down. Flynn (55) worked for 32 years at KPMG, and was chairman of that firm for four years.

6035: 3016:

Alvarez (FED) – So, I think from our prospective, we are taking two high priority approaches. One is we think its important for firms to have good risk management around….

670:

The data necessary to conduct the risk monitoring and risk management function as well as the valuation process over the OTC derivatives dealer's portfolio of products is

2984:

the risks that these major firms face, would that particular activity be in the middle or at the top? Is that a scary, risky thing, or is it kind of not very risky? What

2272:

sub-models, conducted more than 130 independent assessments, and established new permanent functions and processes to enhance the firm's overall capital planning process.

420:

designed to reduce the likelihood that financial and operational weakness in the holding company will destabilize the broker or dealer, or the broader financial system.

2069: 6908: 3935:

was the only entity engaged in prop trading. This included prop trading on the equities, fixed-income and commodities desks to exploit short term movements in prices.

6546: 3750:

VaR is used in the marked risk deduction from net capital. If they have large losses we make them back test and tell us why their estimates of risk were so far off.

6516: 1826:

investigation concerning fraudulent evaluations of the bank's losses. On September 19, 2013 JPMorgan agreed to pay a $ 920M fine in the London Whale trading loss.

2402:"unique in Congress, the minority party’s staff is involved throughout the inquiry. Members from both parties tend to stick together when presenting conclusions." 7007: 382:

The amendments should help the Commission to protect investors and maintain the integrity of the securities markets by improving oversight of broker-dealers and

6197: 4254: 3724: 3539: 2437:

Failure of JPM to disclose material facts to regulators. Allowed bets to build and concealed information required to be disclosed (OCC is the primary regulator)

1573:

Later at Dresdner Kleinwort Wasserstein, where he supervised proprietary traders, he left after losing a three-way battle for sole leadership of capital markets

327:

Requires additional disclosure (Item 407 of Regulation S-K) in proxy and information statements about the board’s role in the company’s risk management process

977:

The VaR model must be reviewed both periodically and annually. The periodic review may be conducted by the broker’s or dealer’s internal audit staff, but the

6064: 4269:

According to the Wall Street Journal, CFTC subpoenaing internal bank emails to determine if JPMorgan officials made deceptive statements to manipulate price

422:

The focus of this supervision of the ultimate holding company is its financial and operational condition and its risk management controls and methodologies.

6255: 4562:

Firms must learn the lessons from this incident and ensure that they have business practices, values and culture to control the risks in their businesses.”

4038:

The Wall Street Journal, citing people close to the situation, reported Aug. 27 that the penalties were expected to total $ 500 million to $ 600 million.

3523: 1029:

The internal investigation concluded in July 2012. It involved more than 1,000 people across the firm and outside law firm WilmerHale. www.wilmerhale.com

651:, in accordance with written procedures, the OTC derivatives dealer's business activities for consistency with risk management guidelines including that: 6477: 4942: 4086:

Since the Rakeoff Citigroup case a handful of other judges have also voiced discomfort with allowing defendants to pay fines without admitting liability.

2671:. I think we have already learned through some of Mr. Sullivan and the reviews conducted by Mr. Waterhouse that, at least from a supervisory standpoint, 2446:

Regulators failed to properly react (JPM reported a new risk model was installed that "cut the measured risk in half." Regulators failed to investigate.)

1373: 5394: 4391:

earlier HSBC had been subject to a formal cease and desist order for similar violations. A cease and desist order can operate as a permanent injunction.

4045:

JPMorgan may make some admissions while settling with the SEC, such as conceding that it erred in how it oversaw the traders and their unit 9-17-2013

1959:“We are very comfortable with our positions as they are held today, and I would add that all of those positions are fully transparent to the regulators” 1924:

Risk controls on traders in the CIO were eased last year without Dimon knowing, the Wall Street Journal reported on Friday, citing unidentified sources.

544:

to assist it in managing the risks associated with its business activities, including market, credit, leverage, liquidity, legal, and operational risks.

4083:

JPM is also battling shareholder lawsuits that allege that it failed to exercise adequate oversight of risky activities in its chief investment office.

4070:

rejected a $ 285 million settlement that the SEC negotiated with Citigroup, in part because the deal included neither-admit-nor-deny language. More at

6981: 3462:(3) it would be in the public interest to appoint an outside Special Counsel to assume respectability for the investigation. 28 C.F.R SS 600.1(a),(b) 2462:

Iksil emailed a senior trader advising against increasing the bet, as the size of the trades were becoming “scary”. Advised take the “full pain” now.

1687:

often began weekly global strategy sessions by saying he had little to say—and then discussed global economies at length in his thick Spanish accent.

2650:: Have you given thought as to tackle how to detect undisclosed derivative portfolios, above a certain size? Since the derivative issue is so huge, 1815:. A private man, no public photographs of him are said to exist. Iksil was so powerful and so bullish in early 2012 that his trades alone moved the 892:

JPMorgan Chase has launched its own internal investigation into the trading losses by involving its internal audit department, general counsel, and

7595: 4090:

JPMorgan said it anticipates $ 6.8 billion in future legal costs in excess of the money it has already set aside to handle litigation. 9-16-2013

4124:

breakdowns and disclose the full scope of its CIO trading disaster, the bank’s Audit Committee was in the dark about the extent of these problems.

3343:

charging Javier Martin-Artajo a trading supervisor, and Julien Grout , a lower level trader, with four counts each of breaking U.S. Federal Law:

7543: 7385: 6856: 7278: 5073: 866:

The Board of Directors exercises its oversight of risk management’s principally through the Board’s Risk Policy Committee and Audit Committee.

5651: 4025:

to reported income. Given the prior retail reserves were very large, their reversal at this particular time may actually result in a sizable

59: 5569: 5186: 3564:

The Treasury Secretary of the United States (himself a former Chairman of the NY Fed) stated that Fed bank board members have zero role in:

147:

was possibly being affected by aggressive trading activities. The source of the unusual activity turned out to be Bruno Iksil, a trader for

7226: 6345: 4210:

Does the global settlement agreement preclude either civil or criminal enforcement action against individuals at JPMorgan? Why or why not?

2201:

2012_JPMorgan_Chase_trading_loss#Senate_Committee_on_Homeland_Security_and_Governmental_Affairs_-_Permanent_Subcommittee_on_Investigations

1052:

Many points on Drew, Duersten, Macris & Tse referenced from - NY Times article More points on key people referenced from WSJ Article.

6398: 4972: 7304: 6740: 5099: 4138:

Although today’s settlement resolves claims against JPMorgan relating to this matter, our investigation is continuing as to individuals.

931:

failing to discount for lack of marketability. JPM had accumulated an extremely large position relative to typical trading volumes. see

804:

The Firm employs a formalized risk appetite framework to clearly link risk appetite and return targets, controls and capital management.

7621: 5543: 5231: 4490: 547:

An OTC derivatives dealer shall consider the following when adopting its internal control system guidelines, policies, and procedures:

5348: 5054: 3457:

is a member of the Cabinet and as head of the Department of Justice is the top law enforcement officer and lawyer for the government.

2654:, around the world, and I think in the trillions here for that matter, have you given thought as to how we are going to provide some 4201:

Given the seriousness of these events and my continued interest in this matter, please provide responses to the following questions.

3301: 4566:

JPMorgan Chase Bank N.A. fined £137,610,000 for serious failings relating to its Chief Investment Office’s “London Whale” trades

2070:

http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000019617&type=8-K&dateb=&owner=exclude&count=40

7745:"JPMorgan Chase Bank N.A. fined £137,610,000 for serious failings relating to its Chief Investment Office's "London Whale" trades" 4014:

JPM will reverse that (correcting the initial overestimation) at this particular time. That transaction will boost current income.

3878: 1811:

who is held responsible for a $ 2 billion loss. Reportedly he began working for JPMorgan in 2005 and lives in Paris, commuting to

494:

VaR model used to calculate market or credit risk for a position must be integrated into the daily internal risk management system

5309: 5126: 4331:

the acknowledgment, the trading commission is pursuing a lawsuit against JPMorgan, which could cast a darker cloud over the bank.

4186: 4053: 3957:

Securities and Exchange Commission v. Martin-Artajo, 13-cv-05677, U.S. District Court, Southern District of New York (Manhattan).

2200: 1708:

trading team had begun to doubt market prices and were convinced rivals were manipulating markets to the detriment of J.P. Morgan

106: 102: 98: 94: 90: 86: 82: 6005: 1859:

five months during the time of the trades and had a relatively inexperienced executive in charge of risk management in the CIO.

912:

was deemed found in this business unit which required the restatement and re-issuance of corrected Q1 2012 financial statements.

3946:

SEC questioned those distinctions and was clearly focused on JPMs proprietary trading disclosures well ahead of the large loss.

3858: 3809: 3796: 3782: 3768: 330:

Must disclose whether and why they have chosen to combine or separate the principal executive officer and board chair positions

4041:

Federal and State Attorneys may later levy separate penalties against JPM (in addition to the two employees who were indited.)

723:

An understanding of risk management principles and practices with respect to bank holding companies or depository institutions

611:

of the governing body's periodic review of the risk monitoring and risk management written guidelines, systems, and processes;

7825: 7791: 7661: 7569: 7212: 7130: 6719: 6666: 6613: 6289: 6156: 6103: 5797: 5608: 5158: 5011: 4255:

http://banking.senate.gov/public/index.cfm?FuseAction=Hearings.LiveStream&Hearing_id=0ca41adf-ec74-4742-afa0-09bda7df05ca

3834:

effect of increasing management’s compensation may well render material a relatively small misstatement of a financial item).

3454: 3283: 4262:

Rule 180.1 modeled after Section 10(b) and Rule 10b-5 SEC Act 1934 - broadly prohibits fraud and fraud-based manipulation.

4135:

The $ 200 million will be placed in a fund for compensation of investors harmed by JPMorgan’s inaccurate financial reports.

2440:

Failure of JPM to disclose material facts to JPM investors (SEC regulates what information must be disclosed to investors )

2188:

a modern Glass-Steagall firewall that separates core banking system from higher-risk, hedge fund-style proprietary trading.

1166:

traders "may have been seeking to avoid showing the full amount of losses" by placing inaccurate prices on their positions.

6627: 5494:"J.P. Morgan 'Whale' Was Prodded Bank's Probe Concludes Trader's Boss Encouraged Boosting Values of Bets That Were Losing" 4243: 4049:

The bank isn’t likely to admit mistakes beyond what it disclosed when releasing the results of an internal review earlier

2171:, bans high-risk trading inside commercial banking and lending institutions. The rule goes into effect on July 21, 2012. 1767: 6170: 5702: 4616:

Bloomberg News, Robert Schmidt identified several people at JPM involved the lobbying and government relations response

4535: 3593:

Federal Reserve Bank Governance - Opportunities Exist to Broaden Director Recruitment Efforts and Increase Transparency

2253:

sales and trading business. Additionally, we no longer sell identity theft protection and credit insurance to customers.

7083: 5729: 4456:

OCC Assesses $ 300 Million Civil Money Penalty Against JPMorgan Chase, N.A., Related to Derivatives Trading Activity

847:

are responsible for managing the Firm’s liquidity, interest rate and foreign exchange risk, and other structural risks.

7676:"OCC Assesses $ 300 Million Civil Money Penalty Against JPMorgan Chase, N.A., Related to Derivatives Trading Activity" 6931:"JPMorgan Chase Whale Trades: A Case History of Derivatives Risks and Abuses Permanent Subcommittee on Investigations" 6478:

http://dealbook.nytimes.com/2013/08/09/authorities-set-to-arrest-2-former-jpmorgan-employees-in-london-whale-case/?hpw

5865:"Another risk officer in JPMorgan 'Whale' trade retains lawyer - At least six individuals have hired lawyers in probe" 5741: 5420: 4542: 3599:

take additional steps to strengthen controls designed to manage conflicts of interest involving Reserve Bank directors

3175:

hat are we doing? You are supposed to be regulating. We are all supposed to be out there. You have got on-site teams!

5282: 5205: 655:

Risks arising from the OTC derivatives dealer's OTC derivatives activities are consistent with prescribed guidelines

6574: 5930: 5026: 4213:

Has anyone within your agency referred any individuals to the DOJ for criminal prosecution? If so, please explain.

959:

See key people section (Martin-Artajo) for a discussion of changing initial valuations to conceal revealing losses.

5444: 7491: 6883: 6489: 6426: 6117: 5830: 5758: 5677: 5626: 5493: 3803:

To the extent that risks arising from the registrant's compensation policies and practices for its employees are

3139:

I thought that’s the reason you have people on location – in order to watch what is going on! You have 65 people.

2449:

Emphasis on senior executives in the U.S., what they knew, the timing of when they knew it, and how they reacted.

161: 6930: 5864: 3844:

event will occur and the anticipated magnitude of the event in light of the totality of the company activity’”).

3628: 1997:

are far from bright line, crystal clear. The distinction is almost as difficult as the division between prudent

853:

Each LOB has a risk committee which includes in its mandate oversight of the reputational risks in its business.

6260: 5904: 5257: 3950:

SEC Charges Two J.P. Morgan Traders With Fraudulently Overvaluing Investments to Conceal Losses Aug 14, 2013

3639:

JPMorgan Chase & Co. to pay $ 200 million for oversight, management, and controls deficiencies 9-19-2013

2311: 1588:

trades growing more complex, making them harder to exit when market conditions turned against the bank in 2012.

744: 5333: 4487:

to determine whether or not the bank is operating safely and soundly, and meeting all regulatory requirements.

4298:

Resolution with many regulators is expected the week of September 16, 2013 but won't likely include the CFTC

4106:

JPMorgan Chase & Co. has agreed to admit wrongdoing and pay a $ 200 million penalty to the SEC 9-19-2013

3759: 2602:

management's responsiveness or ability to correct less than satisfactory conditions is lacking to some degree.

1906:

old model $ 129 million or more in a day during the first quarter an amount higher than during the 2008 crisis

7518:"SENATOR McCAIN SENDS LETTER URGING THE GOVERNMENT TO HOLD INDIVIDUALS ACCOUNTABLE IN "LONDON WHALE" DEBACLE" 5882: 4850: 4358:

to determine whether or not the bank is operating safely and soundly, and meeting all regulatory requirements

3849:

If the SEC doesn't prevail in the JPM case S-K Item 402(s) will likely need to be revised to have any effect.

507:, as that term is defined in section 2(a)(12) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201 et seq.); and 7144: 6551: 6431: 5977: 4372: 3362: 2395:

Subcommittee is "unencumbered by many of the political restraints faced by other congressional committees"

2194: 1694:"We should not be showing a certain amount of losses from the trades until we see where the market is going" 148: 5455: 4908: 4445: 4181:

U.S. Senator John McCain (R-AZ) letter to the Chair of the SEC urging individual accountability 9-19-2013

1172:

Dimon's $ 23 million 2011 compensation, and 2012 compensation may be subject to claw back by this committee

937:

carelessly using outside pricing companies and brokers estimates of valuations on thinly traded instruments

760:

receive and review reports from management of the steps it has taken to monitor and control such exposures.

449:

a description of the broker’s or dealer’s internal risk management controls over those models, including a

388:

The qualitative requirements, listed in paragraph (e)(1) of proposed Appendix E, would have required that:

123:(CDS) were entered, reportedly as part of the bank's "hedging" strategy. Trader Bruno Iksil, nicknamed the 7831: 7828: 7252: 5678:"Cold Eye Over 'Whale' Probe - J.P. Morgan Board Picked 'Tough as Nails' Director to Head Trading Inquiry" 5544:"Cold Eye Over 'Whale' Probe - J.P. Morgan Board Picked 'Tough as Nails' Director to Head Trading Inquiry" 4893: 4427:

against JPM. Found deficiencies related to the credit derivatives trading practices conducted by the CIO:

3692: 956:

Accounting rules dictate valuation at the best estimate of where positions might be reasonably liquidated.

893: 573:

An OTC derivatives dealer's internal risk management control system shall include the following elements:

489:

To be approved, each VaR model must meet the following minimum qualitative and quantitative requirements:

289:

Dodd-Frank established "Enhanced Prudential Standard" for banks with greater than $ 50 billion in assets.

5831:"J.P. Morgan Knew of Risks - Warning Flags Raised Two Years Ago About Trading Desk That Lost $ 2 Billion" 4216:

Please describe how each of the following were considered, determined, and structured in the settlement.

3512:"Technically Incompetent" NY Fed Examiner of Biggest Banks Pre Crisis Promoted for Blowing Up the Economy 2331:

Senate Committee on Homeland Security and Governmental Affairs - Permanent Subcommittee on Investigations

2261:

the number of vendors we have, which reduces complexity in our business and creates more jobs internally.

456:

if a mathematical model incorporates empirical correlations across risk categories, a description of the

7722: 7192: 7098: 6699: 6646: 6593: 6136: 6083: 5777: 5588: 5512: 1776:

The Wenner law firm lists offices in Paris, Berlin, Milan but does not list any offices in London or NY.

1753:"for pursuing trades that rivals sometimes thought were overly aggressive but often led to huge profits" 6768: 5717: 4593:

JPMorgan’s failings were extremely serious and undermined trust and confidence in UK financial markets.

3862:

requires companies to describe the material risks they face and how particular risks affect the company

3466: 3190:

I come here and read all this testimony and it’s all, just kind of just angling towards the same thing.

7171:"REGULATION S-KITEM 402(S): REGULATING COMPENSATION INCENTIVE-BASED RISK THROUGH MANDATORY DISCLOSURE" 5283:"Crony Capitalism: After Lobbying Against New Financial Regulations, JPMorgan Loses $ 2B in Risky Bet" 4523: 4496: 4362: 4111: 3665: 3606:

help enhance economic and demographic diversity and broaden perspectives among Reserve Bank directors

2306: 7054: 5477: 3954: 3498:(senior advisor in both the Nixon and Reagan administrations, author, former writer for Fortune) and 3269:

Complaints were filed August 9, 2013, sealed, and then made public later in August 2013 (see below)

2370:

Studying or investigating the efficiency and economy of operations of all branches of the Government;

226:

Trade #2 summary: Left 2012 neutral, 2013-2017 betting that investment grade bonds will not default.

120: 7145:"JPMorgan Chase & Co. to pay $ 200 million for oversight, management, and controls deficiencies" 6935: 5847:

The named reference "WSJ 21 August 2012" was defined multiple times with different content (see the

4491:

http://www.occ.treas.gov/about/who-we-are/district-and-field-offices/northeastern-district-info.html

3800:

This is a very new SEC item. JPM will likely be a test case as the regulation here is weakly formed.

2383:

The subcommittee has conducted numerous investigations including the 600+ page report in April 2011

1914:

bank had tried the new model, and then reverted to the old one, which it had used for several years.

688:

in the operating systems and to contain the extent of losses arising from unidentified deficiencies;

6294: 4898: 4120:

Today’s action makes clear that JPMorgan’s control breakdowns went far beyond the CIO trading book.

4114:

by George Canellos, co-director of the Securities and Exchange Commission’s division of enforcement

3553:

and in collaboration with Reserve Banks and other domestic and international regulatory authorities

3357: 2970:

The June 19 hearing, as it relates to regulatory shortcomings, is best summed up by this testimony

2875: 2579: 2562: 2249:

As I said in my annual letter to shareholders earlier this year, our control agenda is priority #1.

1820: 1747:“Everyone knows The Whale, whenever there was a big move in CDS markets, you knew it was the Whale” 1439:

Resigned rapidly after loss announced. Offered to surrender two years of pay and that was accepted.

1377: 813:

Risk Policy Committee approves the risk appetite policy on behalf of the entire Board of Directors.

707:

for the periodic internal and external review of the risk monitoring and risk management functions.

598:, approved by the OTC derivatives dealer's governing body, that include and discuss the following: 144: 5467: 3707: 3502:(former economist for Federal Reserve Bank of New York, the NYSE. Currently Chief US Economist at 2117: 7819: 7764: 7695: 7641: 7464: 7405: 7253:"SEC Charges Two J.P. Morgan Traders With Fraudulently Overvaluing Investments to Conceal Losses" 7027: 6791: 6447: 6366: 6218: 6202: 5950: 5705:, Reuters. By Matt Scuffham and David Henry. London/New York. 14 May 2012. Retrieved 14 May 2012. 4991: 3347: 3308: 3235:

a firm that promotes cashless business transactions using its own coined digital currency called

2412:

Committee is privately interviewing JPMorgan officials as well as OCC examiners and supervisors

1816: 1812: 1731: 1677: 932: 503:. The periodic review may be conducted by the broker’s or dealer’s internal audit staff, but the 415:

Appendix E to Rule 15c3-1 -- Deductions for Market and Credit Risk for Certain Brokers or Dealers

30: 5905:"US considering arrests in JPMorgan 'whale' caseUS considering arrests in JPMorgan 'whale' case" 4745:

formerly a legislative director for Brad Miller (D-NC) member House Financial Services Committee

4508:

Conduct rule-making, supervision, and enforcement for Federal consumer financial protection laws

4460: 2804:: Would you agree that the whale trades were not just a problem caused by rogue traders but was 2468:

Iksil instructed a jr trader to halt trading. A superior however later reversed that decision.

2391:

is seeking testimony from those who worked in or helped lead JPMorgan’s chief investment office"

925:

having the trader who was responsible for the positions record the official accounting valuation

701:

are committed to implementing the risk monitoring and risk management systems and processes; and

4414: 3925:

Between CFO Braunstein, and Suzanne Hayes, assistant director of corporation finance at the SEC

3522:

For more on the Fed's (and Dahlgren's) refusal to acknowledge the subprime mortgage crisis see

2993:

Scott Alvarez (FED) - So, I’m not sure what priority congress wants to assign, but regulators….

2964: 1273: 1195:

Was asked by other directors including Dimon to stay on past the JPM board retirement age of 72

432:

of the broker or dealer and how that system satisfies the requirements set forth in Rule 15c3-4

425:

A broker-dealer shall submit the following information to the Commission with its application:

7427:

The named reference "WSJ9-19-2013" was defined multiple times with different content (see the

7170: 6952: 5031: 3822: 3286:

are appointed to assist United States district court judges in the performance of their duties

2489:

include representatives from JPMorgan Chase and the Office of the Comptroller of the Currency.

1544:

Reassigned by the bank to a new risk control team at the overhauled Chief Investment Office.

1143:

On May 23, 2012 a board level vote was taken to establish this special investigation committee

616:

monitoring risk independent of the business or trading units whose activities create the risks

6813:

The named reference "FT9-16-2013" was defined multiple times with different content (see the

4775:

former staffer formerly to Gary L. Ackerman, D-N.Y. member House Financial Services Committee

3744:

must disclose material limitations ... what the VaR model is not telling about the risks

2081: 674:

and information systems are available to capture, monitor, analyze, and report relevant data;

333:

For an overview how banks might operationalize the above Dodd-Frank/FRB/SEC requirement see:

6403: 4973:"The Hunch, the Pounce and the Kill: How Boaz Weinstein and Hedge Funds Outsmarted JPMorgan" 4080:

in certain types of civil settlements vs. just paying fines without acknowledging liability.

3491: 1993:

Accountants in FASB 133 attempt to define what exactly is hedging. The distinction that and

1804: 1610:

was routinely shouted down by Mr. Macris during conference calls between London and New York

1303:

Chairman of Investment Committee and Member of Operating Committee, JPMorgan Chase & Co.

1123:

meeting of audit committee just before the full board convened April 17, 2012 were informed

3109:

Curry (OCC) - Not at the moment, who was in charge of looking at the derivatives portfolio.

2426:

5-17-2012 letter sent by Levin & Merkley to five key regulators regarding Volker rule:

940:

blindly accepting outside pricing data which was egregiously wide, and failing to follow up

883:

The Board of Directors also reviews selected risk topics directly as circumstances warrant.

550:

The sophistication and experience of relevant trading, risk management, and internal audit

7777: 7744: 7708: 7654: 7477: 7418: 7205: 7123: 7111: 7040: 6967: 6804: 6712: 6659: 6606: 6464: 6399:"JPMorgan's 'London Whale' Not Allowed To Trade After $ 2 Billion Loss - Business Insider" 6383: 6235: 6149: 6096: 5963: 5790: 5601: 5529: 5004: 3527: 3508:

Stress Testing the System: Simulating the Global Consequences of the Next Financial Crisis

3503: 3322:

Levin statement on settlement and penalties in JPMorgan “London Whale” trades 9-19-2013

3163:

they at least they were finally worried “we are seeing recent losses”. That’s revealing.

2934:“Examining Bank Supervision and Risk Management in Light of JPMorgan Chase’s Trading Loss” 1268:“Examining Bank Supervision and Risk Management in Light of JPMorgan Chase’s Trading Loss” 880:

Each of the committees oversees reputation risk issues within its scope of responsibility.

368:

Amends Rule 15c3–1 2 (the ‘‘net capital rule’’) under the Securities Exchange Act of 1934

4146: 3499: 3485: 7445:"JPMorgan Chase Agrees to Pay $ 200 Million and Admits Wrongdoing to Settle SEC Charges" 6680: 4758: 4151: 4142:

JPMorgan Chase Agrees to Pay $ 200 Million and Admits Wrongdoing to Settle SEC Charges

2561:

position valuations” at the CIO. . As a result, in July 2012, OCC downgraded the bank’s

2132:

Materials released at 7:00 a.m. Call and Q&A at 7:30 a.m. - 9:30 (Eastern)

402:

for purposes of computing market risk, the multiplication factor be determined based on

384:

providing an incentive for broker-dealers to implement strong risk management practices.

168:

The following is an overview of the trades that resulted in a multibillion-dollar loss.

6681:"SEC asks FASB to review accounting for hedging derivatives when counterparties change" 6350: 6321: 4918: 4868: 3484:

Sarah J. Dahlgren, Executive Vice President FRB NY - Financial Institution Supervision

2604: 2589:

in some measures, or some other conditions exist such as inadequate strategic planning

1808: 1768:

http://www.legal500.com/firms/490-browne-jacobson-llp/offices/7519-london/lawyers/43750

412: 321:

Issued by SEC, became effective as of February 2010 Overview here. For more detail see

140: 4450:

See also Federal Reserve Board C&D order issued today at the holding company level

4172:

Chuck Grassley (R-IA) on Government Settlement Over “London Whale” Trades 9-16-2013

3273:

complaints consisted solely of sworn charges by Jonathan Polonitza, Special Agent, FBI

1367:

was a high ranking executive on Wall Street. She was the Chief Investment Officer for

1306:

See SEC section for letters exchanged concerning what must be considered prop trading.

783:

See also the section on key people: Board of Directors - Risk Policy Committee members

535: 6290:"Who Is the London Whale? Meet JPMorgan's 'Humble' Trader Bruno Iksil -- Daily Intel" 4067: 3766:

Management’s Discussion and Analysis of Financial Condition and Results of Operations

3680:

Will the Financial Stability Oversight Council (FSOC) study and report on this event?

3259: 3256: 2409:

A hearing sometime in 2012 is planned to unveil findings on JPM and the Volcker Rule

1979:

FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities

679:

management to take action when internal risk management guidelines have been exceeded

397:

reviewed by the firm periodically and annually by a registered public accounting firm

4730: 3818:

was lobbied in. Research indicates that no firms have actually made this disclosure.

3670:

Involved with Volker Rule writing - Mary Miller, Undersecretary for Domestic Finance

3392: 2596:

is either characterized by modest talent when above average abilities are needed or

1900:

Dimon announced loss of at least $ 2 billion through "egregious mistakes" in trading

1501:

Brother-in-law, Barry Zubrow, the bank's chief risk officer until early January 2012

1146:

This was 10 days after JPM disclosed on May 13 that multiple billions had been lost.

7444: 4903: 4888: 2164: 2010: 1844:

Criminal complaint issued in August 2013 but reported to be in France at that time.

1508: 1413:

moved from one floor above the trading desk, to senior executive section on 48th Fl

322: 29:"London whale" redirects here. For the whale lost in the River Thames in 2006, see 1591:

No one could sufficiently push him back, so he and Bruno could do what they wanted

625:

from or senior to the business or trading units whose activities create the risks;

243:

Junk would rise (loss on trade #1), but Quality would also rise (gain on trade #2)

4312:

CFTC is seeking a fine and an admission by the bank that it manipulated the index

3380:

U.S. v Martin-Artajo et al., U.S. District Court, Southern District of New York,

3063:

You are the guy in charge, you! The Federal Reserve. You say so in your testimony

1384:

Was employed by Chemical Bank, predecessor through merger to JPMC, in early 1980s

5395:"I Was In The Room When Boaz Weinstein Revealed His Trade That Creamed JPMorgan" 4913: 4763: 4397:

Requires the bank to take comprehensive corrective actions to improve compliance

3388: 2199:

See Levin's follow up investigation of JPM related to the Volcker rule above at

1800: 1368: 1261: 732:

clear who, if anyone, approved JPMC's VaR methodology, as the guidance requires.

72: 40: 17: 7008:"Levin statement on settlement and penalties in JPMorgan "London Whale" trades" 4394:

Taken against a bank for violating specific statutes and underlying regulations

3729:

Proxy Disclosure Enhancements (Established by SEC within past couple of years.)

1773: 1721:

JPM so far has failed to provide sufficient evidence to support the allegations

1407:

solid track record during extremely difficult time led to strong trust by Dimon

542:

establish, document, and maintain a system of internal risk management controls

363: 347: 4578:

JPMorgan’s failings extend to its senior management’s response to the problems

3524:

Fed Chairmen and Presidents: Roundtable with Roger Kubarych and Richard Whalen

2358:

Permanent Subcommittee on Investigations - Investigation of JPM Trading loss

1671: 928:

valuing esoteric and thinly traded instruments as if they were more marketable

136: 6909:"JPMorgan Chase Whale Trades: A Case History of Derivatives Risks and Abuses" 4778: 3311: 3277: 2636:: I was certainly taken aback by the press stories and as we delved into it, 2353:

Has five subcommittees including the Permanent Subcommittee on Investigations

2336:

Background on Senate Committee on Homeland Security and Governmental Affairs

1149:

The committee will review and double-check management's special investigation

529:

SEC rule internal risk management control systems for OTC derivatives dealers

6490:"J.P. Morgan Agrees to Pay $ 920 Million Fine Tied to 'London Whale' Fiasco" 4400:

Reports deficiencies with respect to internal controls and other activities.

3961: 3629:

http://www.federalreserve.gov/newsevents/press/enforcement/enf20130114a1.pdf

3336: 3295: 2482:

JPMorgan Chase Whale Trades: A Case History of Derivatives Risks and Abuses,

2323:

Who audits central banks? (EG The NY Fed, that Diamon is a board member of)

2312:

http://banking.senate.gov/public/index.cfm?FuseAction=Newsroom.PressReleases

1652:

Head of credit trading /credit-trading chief for the Chief Investment Office

1076: 1070: 766:

approve and periodically review the corporation's Risk Appetite Policy, and

745:

http://www.jpmorganchase.com/corporate/About-JPMC/risk-committee-charter.htm

119:, who has since stepped down. A series of derivative translations involving 6316: 3747:

changes to the VaR model and its characteristics must be publicly disclosed

3589:

GAO Report on manage conflicts of interest involving Reserve Bank directors

3098:, at the time you were discussing earlier, during that time of early April? 1849:

JPM organizational structure, risk systems, accounting and internal control

1838:

Remained at JPM after other traders involved in the whale trades were fired

1082: 4851:

http://www.opensecrets.org/orgs/congcmtes.php?id=D000000103&cycle=2012

4793: 4430:

inadequate oversight and governance to protect the bank from material risk

2090:

Matt Zames succeed Ina Drew as Chief Investment Officer. Ina Drew retired.

451:

description of each category of persons who may input data into the models

7357:"Regulators to charge JPMorgan Chase $ 750 million in London Whale cases" 4673:

former senior staff member, Senate Banking Committee Chairman Tim Johnson

4538:

is continuing to conduct a formal enforcement investigation. 14 Jan 2013

4315:

The bank has balked at the admission, derailing current settlement talks.

4062:

SEC seeks admission of wrongdoing from JPMorgan in ‘London Whale’ case

3928:

Hayes questioned the extent of what needs to be disclosed as prop trading

3738:

Rule Internal Risk Management Control Systems for OTC Derivatives Dealers

3229: 2849:

raises questions not just about JPMorgan but about derivatives in general

2195:

http://levin.senate.gov/download/?id=bbfdcd6b-e848-45d2-903e-602bfde6edd9

1935: 1780: 1363: 1250:"flawed, complex, poorly reviewed, poorly executed, and poorly monitored" 302:

Requires a formal written charter approved by the full board of directors

116: 7331:"SEC seeks admission of wrongdoing from JPMorgan in 'London Whale' case" 7084:"Tim Geithner On Dimon: Federal Reserve Banks Have 'Perception Problem'" 4373:

http://www.ft.com/intl/cms/s/0/9b8b53d4-aa6e-11e1-899d-00144feabdc0.html

4076:

In June 2013 SEC Chairman Mary Jo unveiled the standard that demands an

3594: 3510:) wrote an extensive article on Dahlgren reproduced at Nakedcapitalism: 1982:

derivative must be highly effective at offsetting the risks being hedged

969:

PricewaterhouseCoopers LLP, 300 Madison Avenue, New York, New York 10017

430:

comprehensive description of the internal risk management control system

406:

used to calculate market risk and by reference to Table 1 of Appendix E.

85:, settlements totaling $ 920m (and major related documents released) by 5625:

Fitzpatrick, Dan; Zuckerman, Gregory; Lublin, Joann S. (11 June 2012).

4446:

http://www.occ.gov/news-issuances/news-releases/2013/nr-occ-2013-7a.pdf

4279:

New powers granted from the Dodd-Frank Act lowers the bar for charges.

3693:

http://www.treasury.gov/initiatives/fsoc/Pages/studies-and-reports.aspx

3316:

On April 25, 2012, President Obama nominated Schofield to her position.

3056:

examination teams have three objectives, one of which is the key risks.

2034:

Director departs (if due to any disagreement must disclose the discord)

1140:

source and other JPM public filings including the 2012 proxy statement

6832:"Jamie Dimon: From Wall Street's whipping boy to the GOP's golden boy" 5074:"As One JPMorgan Trader Sold Risky Contracts, Another One Bought Them" 4343:"Ensuring a safe and sound national banking system for all Americans" 4306: 3689:

The prime regulator was the FRB of NY, Jamie Dimon was on both boards.

3304:

and signed by a Foreperson (chair and spokesperson for the grand jury)

2959: 2824:: Am I correct that the next step relative to the C&D Order is to 2456:

A hearing is currently planned but the date and details are unsettled.

2350:

Assumed responsibility for the Department of Homeland Security in 2003

2242:

Message From Jamie Diamon 9-16-2013 just ahead of $ 920m settlement

1629:

took over for Ms. Duersten as head of the North American trading desk.

1219:

Outside special counsel is Robert Mundheim at Shearman & Sterling

1179:

Members (all current board members) of this special committee include

979:

annual review must be conducted by a registered public accounting firm

763:

review management's performance against these policies and benchmarks.

505:

annual review must be conducted by a registered public accounting firm

5421:"To Understand JPMorgan's Trading Fiasco You Have To Go Back To 2005" 3251:

United States Attorney's Office for the Southern District of New York

3225:

Jonathan Polonitza, Special Agent with the FBI led the investigation

3151:

You all didn’t call him and tell him! He is alarmed with the changes!

3038:

Pearce (R-NM) - O.K. so it can be that’s all I’m trying to establish.

2385:

Wall Street and the Financial Crisis: Anatomy of a Financial Collapse

1419:

became much less hands-on with the trading floor and the trading book

1220: 768:

review actual or forecast results exceeding risk appetite tolerances.

4695: 4439:

inadequate development and implementation of models used by the bank

4369:

believe that giving the same people more rules to enforce would help

3581:

Dimon was thought to be a candidate to become Chairman of the FRB NY

3467:

http://www.bettermarkets.com/sites/default/files/Holder%20letter.pdf

3263:

Bharara was nominated to his post on May 15, 2009 by President Obama

3250: 2339: 2319:

Jamie Dimon: From Wall Street’s whipping boy to the GOP’s golden boy

2301: 2027:

8-K reports to the SEC must be filed for any of the following (only

1760:

Has hired criminal defense lawyers in New York and Washington, D.C.

1461:

Raised general concerns about risks being taken by the London office

1266:

Dimon appeared before the House Financial Services hearing entitled

399:, as that term is defined in the Sarbanes- Oxley Act of 2002; 52 and 7570:"JPMorgan Chase Is Said to Admit Fault in Settlement of Trade Loss" 4864:

Class Period - purchasers JPM stock between 5/13/2012 and 6/11/2012

4846:

House Financial Services Committee member campaign funds: $ 168,055

4524: