JPMorgan's Dimon Expected to be Cleared in Ongoing SEC 'Whale' Probe
Updated from 4:42 p.m ET Thursday, with JPMorgan's settlement with the Consumer Financial Protection Bureau and Friday premarket action.
NEW YORK ( TheStreet) -- JPMorgan
The SEC, even after winning an admission by JPMorgan that it broke federal securities laws in its handling of the trade, continues to investigate individuals involved. The regulator's settlement also repeatedly notes that senior management at the bank failed to adequately disclose the extent of the trading loss to its Board of Directors and to investors by way of its financial statements, however, an ongoing investigation is unlikely to target Dimon.
"Our counsel has had discussions with the SEC Staff, and the Staff has informed us that based on the evidence now known to them, they do not anticipate recommending any action against Mr. Dimon," JPMorgan said in an emailed statement.
In total, the bank's regulatory tab on Thursday was $1.289 billion, split between $920 million in fines from four regulators over its "London Whale" trading loss, and $369 million in fines and customer refunds from the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency, springing from "illegal credit card practices."
In a settlement with the SEC, the bank also admitted it violated federal securities laws and its senior management failed to ensure that traders in the bank's now-disbanded Chief Investment Office (CIO) properly valued a portfolio of illiquid structured products that swelled to over $150 billion by early 2012.
That settlement and a report detailing what senior JPMorgan management knew of the trading losses, however, left open the prospect that some top executives would face additional sanction from regulators.
JPMorgan admitted its senior management failed to timely escalate deficiencies within the CIO unit to the firm's audit committee, according to the SEC. By late April 2012, the SEC also said JPMorgan senior management knew that the firm's Investment Banking unit used far more conservative prices when valuing the types of assets in its CIO portfolio, and that applying those valuations would have caused approximately $750 million in losses for the CIO in the first quarter of 2012.
Unnamed senior managers also personally rewrote the CIO's valuation policies before the firm filed with the SEC its first-quarter report for 2012, which showed minimal losses. Internal reviews of the CIO unit also led some executives to express reservations about signing certifications for that quarter's earnings report.
"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," the SEC said. Ultimately, JPMorgan restated its first quarter 2012 earnings by $459 million , as CIO losses swelled into the billions.