While JPMorgan’s $920 million “London Whale” regulatory settlement on September 19, 2013, made a splash in the headlines in the past week. One intriguing part of the settlement is the light that it might shed on the practical implications of the SEC’s new policy requiring admissions of wrongdoing to settle some cases. In an Appendix A that accompanies the Cease-and-Desist Order, JPMorgan said (1) that “traders intentionally understated mark-to-market losses” in the SCP investment portfolio; and (2) that despite having “learned of deficiencies as of March 31, 2012 in CIO’s [a business unit of JPMorgan] internal controls,” “JPMorgan Senior Management did not disclose the existence of any significant deficiencies or material weaknesses to the Audit Committee before JPMorgan filed its quarterly report on May 10, 2012”; and (3) that it had various “ineffective internal accounting controls and disclosure controls and procedures.” In its detailed factual statement, JPMorgan acknowledged that “its conduct violated the federal securities laws,” but it did not identify which federal securities laws were violated, did not identify specific individuals responsible for the misconduct described, and, in most instances, did not admit that any of the wrongdoing was accompanied by a culpable mental state. Thus, it appears, the Cease-and-Desist Order may have avoided conceding points at issue in outstanding private litigation.
The entirety of the Cease-and Desist Order may be found here.