JPMorgan Chase & Co. is negotiating final terms of a deal with U.S. securities regulators to end a yearlong probe of derivatives bets that led to the bank’s biggest trading loss ever, two people briefed on the talks said.
While JPMorgan is prepared to say it erred in how it oversaw a unit and London-based traders, executives aren’t likely to admit mistakes beyond what they already disclosed, one of the people said, requesting anonymity because the talks with the Securities and Exchange Commission aren’t public. How much the bank pays to settle is being debated, the people said.
JPMorgan, led by Chief Executive Officer Jamie Dimon, is seeking to resolve U.S. and U.K. probes after botched trades by its chief investment office fueled more than $6.2 billion of losses last year. Senate investigators concluded in March that the bank dodged regulators and misled investors amid souring bets by Bruno Iksil, a trader dubbed the London Whale because his positions were so big.
While the SEC may target some people involved in the trades, top executives at the New York-based company probably won’t face claims they lied or misled the public, the people said. Iksil won’t be charged, Reuters reported yesterday, citing a person familiar with the matter.
John Nester, a spokesman for the SEC, declined to comment. Attorneys for Iksil and three other traders either didn’t immediately respond to messages seeking comment or declined to comment. The New York Times reported yesterday that JPMorgan may make some admissions in an SEC deal.
JPMorgan released a 129-page report in January that blamed managers, many of whom were reassigned or left last year, for roles in failing to halt the loss, as well as an “error-prone” risk-modeling system.
The SEC may accuse the firm of failing to enact proper controls, supervise workers, escalate concerns and share information internally, one of the people said.
The U.S. Senate Permanent Subcommittee on Investigations’ 301-page report accused JPMorgan of hiding losses, deceiving regulators and misinforming investors. The Senate panel, led by Michigan Democrat Carl Levin, referred its findings to the SEC and Justice Department in April.
“There is reasonable cause to believe a violation of the law may have occurred,” Levin said at the time.