JP Morgan pays out on fraud probe
BANKING giant JP Morgan has agreed to pay $153.6m (£94.6m) to the US regulators to resolve an investigation into the selling of risky mortgages at the height of the financial crisis, though it has not admitted liability.
The Securities and Exchange Commission (SEC), Wall Street’s watchdog, had filed civil fraud charges against the bank for allegedly misleading investors who bought mortgage securities it helped to sell.
The New York-based bank had helped to put together a collateralised debt obligation (CDO), a form of investment package, without informing investors that a hedge fund had helped to select some of the mortgage-based assets backing the product.
The hedge fund, Magnetar Capital, had bet the assets would lose value.
Magnetar had helped to select mortgages to be included in the CDO, marketed under the name Squared, whilst investors were told an independent firm, GSC Capital, had selected the securities.
The SEC also filed civil charges accusing Edward Steffelin, a former managing director at GSC Capital, for failing to reveal in marketing materials for the transaction Magnetar’s involvement.
JP Morgan agreed to settle with the regulator, reimburse investors who lost money and improve the way it approves mortgage securities transactions. No executives at the bank have been charged in the probe.