SEC v. : 03 Civ. 2939 (WHP)
J.P. Morgan Securities Inc. settled SEC charges for fraudulently allocating hot IPO shares of Epicor Software Corp. and International Rectifier Corp. to favored clients in exchange for excessive commissions, agreeing to a $1.1 billion distribution fund to compensate eligible investors who purchased these stocks during specified periods without admitting guilt.
J.P. Morgan Securities Inc. agreed to a $1.1 billion settlement with the SEC and other regulators over allegations of securities fraud involving the improper allocation of initial public offering (IPO) shares of Epicor Software Corp. and International Rectifier Corp. to favored clients in exchange for excessive trading commissions. The court ordered the creation of a Distribution Fund, funded by J.P. Morgan’s federal payment plus interest, to compensate eligible investors who purchased Epicor shares (Oct. 22, 1999–Jan. 30, 2001, via Hambrecht & Quist and Chase H&Q) and International Rectifier shares (July 1, 1999–Nov. 1, 2000, via J.P. Morgan). The settlement did not admit liability, and the court explicitly stated that the identified securities and time periods were for administrative purposes only, with no precedential effect.
J.P. Morgan Securities Inc. resolved SEC charges related to securities fraud by agreeing to a $1.1 billion settlement over the improper allocation of initial public offering (IPO) shares to favored clients in exchange for excessive trading commissions and other benefits. The fraud specifically involved Epicor Software Corp., allocated to clients of Hambrecht & Quist LLC and Chase H&Q between October 22, 1999, and January 30, 2001, and International Rectifier Corp., allocated to J.P. Morgan clients between July 1, 1999, and November 1, 2000. To remedy the harm, the court ordered the creation of a Distribution Fund consisting of J.P. Morgan’s federal payment plus any accrued interest, to be equitably distributed to eligible investors who purchased these securities during the specified periods. The settlement did not require J.P. Morgan to admit guilt, and the court emphasized that the identification of the securities and time frames was solely for administrative purposes and not a judicial finding of liability. The Distribution Fund Administrator was tasked with formulating and executing a cost-effective plan to return funds to affected investors. This resolution was part of a broader regulatory crackdown on IPO allocation abuses in the late 1990s and early 2000s. The court explicitly noted that the order had no precedential effect in other legal actions, preserving J.P. Morgan’s legal position while ensuring restitution to harmed parties.
Extracted insights
- company a final judgment as to defendant j.p. morgan securities inc.
- The Court Signed A Final Judgment as to Defendant J.P. Morgan Securities Inc.
- Section II of the Final Judgment Calls for The creation of a Distribution Fund, which consists of Defendant’s Federal Payment plus any income and interest earned thereon.
- Section V.A of the Final Judgment Requires The Distribution Fund Administrator to formulate and administer a Distribution Fund Plan intended to provide for the equitable, cost-effective distribution of funds to Eligible Distribution Fund Recipients.
- Section V.C.1 of the Final Judgment Defines Eligibility for a person to be an Eligible Distribution Fund Recipient, requiring them to have purchased equity securities in question through Defendant during the relevant period of purchase.
- Section V.C.1 of the Final Judgment States Identification of the equity securities in question and the relevant period of purchase for each such equity security will be set forth in a further order of the Court.
- The Court Ordered The equity securities in question and the relevant periods of purchase for each such equity security as follows: Epicor Software Corp. Oct. 22, 1999 – Jan. 30, 2001; International Rectifier Corp. July 1, 1999 – Nov. 1, 2000.
- The identification of equity securities in question and relevant periods of purchase Is solely for The purpose of facilitating the efficient administration of the Distribution Fund Plan.
- The identification of equity securities in question and relevant periods of purchase Is not A judicial or Commission finding.
- The identification of equity securities in question and relevant periods of purchase Is not intended to have Precedential effect in other actions.
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
________________________________________________
:
SECURITIES AND EXCHANGE COMMISSION, :
:
Plaintiff, : Civil Action No.
:
-against- : 03 Civ. 2939 (WHP)
:
J.P. MORGAN SECURITIES INC., :
:
Defendant. :
________________________________________________:
ORDER REGARDING DISTRIBUTION FUND PLAN
On October 31, 2003, the Court signed a Final Judgment as to Defendant J.P. Morgan
Securities Inc. (“Final Judgment”). Section II of the Final Judgment calls for the creation of a
Distribution Fund, which consists of Defendant’s Federal Payment plus any income and interest
earned thereon.
1
Under Section V.A of the Final Judgment, “[t]he Distribution Fund
Administrator shall formulate and administer a Distribution Fund Plan ... intended to provide for
the equitable, cost-effective distribution of funds to Eligible Distribution Fund Recipients.”
Under Section V.C.1 of the Final Judgment, to be an Eligible Distribution Fund Recipient, a
person must have purchased “equity securities in question” through Defendant during the
“relevant period of purchase.” Also under Section V.C.1, “[i]dentification of the ‘equity
securities in question’ and the ‘relevant period of purchase’ for each such equity security will be
set forth (solely for the purpose of administering the Distribution Fund Plan) in a further order of
the Court.”
1
All defined terms in the Final Judgment apply to this Order.
Accordingly, IT IS HEREBY ORDERED that the “equity securities in question” and the
“relevant period of purchase” for each such equity security, as those terms are used in Section
V.C.1 of the Final Judgment, are as follows:
Equity Securities in Question Relevant Periods of Purchase
Epicor Software Corp. Oct. 22, 1999 – Jan. 30, 2001
2
International Rectifier Corp. July 1, 1999 – Nov. 1, 2000
3
The identification of “equity securities in question” and “relevant periods of purchase” made
herein is solely for the purpose of facilitating the efficient administration of the Distribution
Fund Plan, is not a judicial or Commission finding, and is not intended to have precedential
effect in other actions.
SO ORDERED.
Dated: New York, New York
October 31, 2003
________________________________
WILLIAM H. PAULEY III
UNITED STATES DISTRICT JUDGE
2
Limited to purchases of Epicor Software Corp. by clients of Hambrecht & Quist LLC and Chase H&Q.
3
Limited to purchases of International Rectifier Corp. by clients of J.P. Morgan Securities Inc.
- 2 - UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
________________________________________________
:
SECURITIES AND EXCHANGE COMMISSION, :
:
Plaintiff, : Civil Action No.
:
-against- : 03 Civ. 2939 (WHP)
:
J.P. MORGAN SECURITIES INC., :
:
Defendant. :
________________________________________________:
ORDER REGARDING DISTRIBUTION FUND PLAN
On October 31, 2003, the Court signed a Final Judgment as to Defendant J.P. Morgan
Securities Inc. (“Final Judgment”). Section II of the Final Judgment calls for the creation of a
Distribution Fund, which consists of Defendant’s Federal Payment plus any income and interest
earned thereon.1 Under Section V.A of the Final Judgment, “[t]he Distribution Fund
Administrator shall formulate and administer a Distribution Fund Plan … intended to provide for
the equitable, cost-effective distribution of funds to Eligible Distribution Fund Recipients.”
Under Section V.C.1 of the Final Judgment, to be an Eligible Distribution Fund Recipient, a
person must have purchased “equity securities in question” through Defendant during the
“relevant period of purchase.” Also under Section V.C.1, “[i]dentification of the ‘equity
securities in question’ and the ‘relevant period of purchase’ for each such equity security will be
set forth (solely for the purpose of administering the Distribution Fund Plan) in a further order of
the Court.”
1 All defined terms in the Final Judgment apply to this Order.
Accordingly, IT IS HEREBY ORDERED that the “equity securities in question” and the
“relevant period of purchase” for each such equity security, as those terms are used in Section
V.C.1 of the Final Judgment, are as follows:
Equity Securities in Question Relevant Periods of Purchase
Epicor Software Corp. Oct. 22, 1999 – Jan. 30, 20012
International Rectifier Corp. July 1, 1999 – Nov. 1, 20003
The identification of “equity securities in question” and “relevant periods of purchase” made
herein is solely for the purpose of facilitating the efficient administration of the Distribution
Fund Plan, is not a judicial or Commission finding, and is not intended to have precedential
effect in other actions.
SO ORDERED.
Dated: New York, New York
October 31, 2003
________________________________
WILLIAM H. PAULEY III
UNITED STATES DISTRICT JUDGE
2 Limited to purchases of Epicor Software Corp. by clients of Hambrecht & Quist LLC and Chase H&Q.
3 Limited to purchases of International Rectifier Corp. by clients of J.P. Morgan Securities Inc.
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