JPMorgan Admits Metal, Treasuries Spoofing, to Pay $920M Fine

JPMorgan JPM has agreed to pay a penalty of $920 million to fully settle the probes related to “historical trading practices by former employees in the precious metals and U.S. treasuries markets, and related conduct between 2008 and 2016.” The company also admitted to wrongdoing.

Spoofing is a method wherein the traders place orders that they intend to cancel in order to move the prices in a particular direction. While submitting and cancelling orders isn’t illegal, it is against the law to trick other traders with such strategy.

The investigations were being conducted by the Department of Justice (“DOJ”), Commodity Futures Trading Commission, and the Securities and Exchange Commission. The total fine to be paid by JPMorgan includes a penalty of $437 million, restitution of $311 million and disgorgement of $172 million.

Further, JPMorgan has entered into a deferred prosecution agreement (DPA) with the DOJ. The DPA will expire after three years, provided the company and its subsidiaries — JPMorgan Chase Bank, N.A. and J.P. Morgan Securities LLC — fully conform to their respective obligations.

JPMorgan does not expect any disruption of service to clients as a result of these resolutions. Also, the company is required to co-operate with ongoing other investigations and prosecutions.

Daniel Pinto, co-President of JPMorgan and CEO of the Corporate & Investment Bank said, “The conduct of the individuals referenced in today’s resolutions is unacceptable and they are no longer with the firm. We appreciate that the considerable resources we’ve dedicated to internal controls was recognized by the DOJ, including enhancements to compliance policies, surveillance systems and training programs.”

The fine being paid by JPMorgan is by far the largest ever imposed by the regulators on banks for spoofing, which was banned after the 2008 financial crisis under the Dodd Frank regulation. Over the past few years, other global banks like Deutsche Bank DB, UBS Group and HSBC Holdings HSBC have been fined over similar allegations.

Further, last month, Bank of Nova Scotia BNS agreed to pay $127.4 million to resolve U.S. allegations that it engaged in spoofing of gold and silver futures contracts. The bank admitted to wrongdoing.

Shares of JPMorgan have gained 2.2% over the past three months against the industry’s fall of 0.1%.

Currently, JPMorgan carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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