By Justin Baer in New York
JPMorgan Chase?s $153.6m settlement with the US Securities & Exchange Commission has resolved one important legal issue confronting the bank and its shareholders.
But the US bank still faces many legal challenges; more than 10,000 separate proceedings, to be exact. Its actions have drawn litigation on everything from how it foreclosed on borrowers and packaged mortgages into securities, to its role as banker to Bernard Madoff.
After JPMorgan?s settlement with the SEC on Tuesday, the bank?s shares nevertheless rallied on Wednesday amid relief that that the securities regulator?s complaint was not more costly, or more damning.
The SEC filed civil fraud charges against the bank alleging that it misled investors when it created a mortgage-related security for Magnetar, an Illinois hedge fund that was betting against the deal. JPMorgan settled without admitting or denying wrongdoing and the bank was not charged with intentional misconduct.
The bank?s penalty is far less than the $550m Goldman Sachs agreed to pay last year to settle its own civil fraud charges. And unlike the SEC?s case against Goldman and its hapless vice-president, Fabrice Tourre, no current or former JPMorgan executives were charged.
?The lack of something more onerous may be a positive,? Jeffrey Harte, an analyst with Sandler O?Neill, wrote to clients.
Last month, JPMorgan predicted that its ?reasonably possible losses, in excess of reserves? could total up to $4.5bn. While the bank has said it believes it is fully reserved for ?probable losses?, JPMorgan executives have declined to specify how much they?ve set aside for litigation.
?This action will not have a material impact on our earnings,? a bank spokesman said of the SEC settlement. JPMorgan shares rose 18 cents to $41.09.
The US credit-union industry?s top regulator sued JPMorgan on Monday, alleging it mis-sold mortgage-backed securities, and the bank is also part of an inquiry by New York?s attorney-general into the industry?s mortgage practices.
The largest US mortgage lenders, including JPMorgan, remain in talks with prosecutors from all 50 states to settle their probe into lax foreclosure procedures. And last week JPMorgan ousted its top home-loan executive, David Lowman, following mistakes that included overcharging military personnel for loans.
Indeed Wall Street?s reaction to the settlement also appeared to underscore how JPMorgan has to date endured only a glancing blow from the same public rebuke that has hammered the reputations of two of its biggest rivals, Goldman and Bank of America. Both institutions have struggled at times to wrestle investors? attention away from their legal woes.
? The Financial Times Limited 2011