2020-01-01 SEC Press press_release 62 KB 3,208 chars

J.P. Morgan Securities Admits to Manipulative Trading in U.S. Treasuries

Release
2020-233
Source PDF JSON
summary

J.P. Morgan Securities LLC admitted to fraudulently manipulating U.S. Treasury markets by placing fake orders to induce favorable trades, resulting in a $35 million SEC penalty offset by $920 million in total payments across parallel DOJ and CFTC actions, including a deferred prosecution agreement.

paragraph

J.P. Morgan Securities LLC admitted to manipulating U.S. Treasury cash markets between April 2015 and January 2016 by placing non-bona fide orders to create false market demand, enabling its bona fide orders to execute at more favorable prices. The SEC charged it with violating Section 17(a)(3) of the Securities Act, ordering $10 million in disgorgement and a $25 million civil penalty, which was offset by payments in parallel DOJ and CFTC actions. In total, JPMorgan Chase & Co. and its affiliates agreed to pay over $920 million across criminal restitution, forfeiture, disgorgement, penalties, and fines, including a three-year deferred prosecution agreement with the DOJ and settlements with the CFTC.

narrative

Between April 2015 and January 2016, traders at J.P. Morgan Securities LLC engaged in a manipulative scheme involving U.S. Treasury cash securities by placing bona fide orders alongside non-bona fide orders intended solely to mislead the market. These fake orders created a false appearance of buy or sell interest, inducing other market participants to trade against the firm’s legitimate orders at artificially favorable prices, after which the fraudulent orders were promptly canceled. The SEC charged J.P. Morgan Securities with violating Section 17(a)(3) of the Securities Act of 1933, resulting in a $10 million disgorgement and a $25 million civil penalty, with the penalty offset by payments made in parallel proceedings. The U.S. Department of Justice entered into a three-year deferred prosecution agreement with JPMorgan Chase & Co., while the CFTC settled with J.P. Morgan Chase & Co., JPMorgan Chase Bank, N.A., and JPMorgan Securities. Collectively, the three agencies imposed over $920 million in total penalties, including criminal restitution, forfeiture, disgorgement, and fines. J.P. Morgan Securities admitted to the SEC’s factual findings, was formally censured, and ordered to cease and desist from future violations. The SEC acknowledged the critical cooperation of the DOJ and CFTC in uncovering and resolving the misconduct, which undermined market integrity by distorting price discovery in the Treasury market.

Enriched metadata

Scheme
market-manipulation (100%)
Disgorgement
$10,000,000
Civil penalty
$25,000,000
Victim loss
$920,000,000
Classified market-manipulation(confidence 100%). EDGAR detection: forms SC 13D/G/13F· recall 53% / precision 9%. detection rule →
Statutes
Section 17(a)(3) of the Securities ActSection 17(a)(3) of the Securities Act
Parties
Commodity Futures Trading CommissionDepartment of Justicejpmorgan chase & co.j.p. morgan chase & co., jpmorgan chase bank n.a., and jpmorgan securitiesj.p. morgan securitiesj.p. morgan securities llcsec investigation supervised by sanjay wadhwa at new york regional officeSecurities and Exchange Commissionthree-year deferred prosecution agreement with doj
Keywords
morgan securitiessecuritiesmorganmanipulative tradingfide ordersjpmorgan chasetradingmanipulativejpmorganchaseordersecurities morganmillion civilcivil penaltybona fide

Exhibits & Attached Documents (1)

Extracted insights

Dollar amounts 3
  • $920.00M $920 million $100M–$1B
  • $25.00M $25 million $10M–$100M
  • $10.00M $10 million $10M–$100M
Entities 9
  • agency Commodity Futures Trading Commission
  • agency Department of Justice
  • company jpmorgan chase & co.
  • company j.p. morgan chase & co., jpmorgan chase bank n.a., and jpmorgan securities
  • company j.p. morgan securities
  • company j.p. morgan securities llc
  • agency sec investigation supervised by sanjay wadhwa at new york regional office
  • agency Securities and Exchange Commission
  • agency three-year deferred prosecution agreement with doj
Triples 13
  • SEC announced charges against J.P. Morgan Securities LLC for fraudulently engaging in manipulative trading of U.S. Treasury securities
  • J.P. Morgan Securities LLC agreed to pay $10 million disgorgement and $25 million civil penalty
  • DOJ announced parallel actions against JPMorgan Chase & Co. and certain affiliates for manipulative trading in precious metals and U.S. Treasuries futures and cash markets
  • CFTC announced settlements with J.P. Morgan Chase & Co., JPMorgan Chase Bank N.A., and JPMorgan Securities
  • JPMorgan Chase & Co. entered into three-year deferred prosecution agreement with DOJ
  • Traders on J.P. Morgan Securities' Treasuries trading desk employed manipulative trading strategies involving Treasury cash securities between April 2015 and January 2016
  • Traders placed bona fide orders to buy or sell Treasury securities while simultaneously placing non-bona fide orders on the opposite side
  • Non-bona fide orders intended to create false appearance of buy or sell interest to induce other market participants to trade at more favorable prices
  • Traders cancelled non-bona fide orders after securing beneficially priced executions for bona fide orders
  • J.P. Morgan Securities violated Section 17(a)(3) of the Securities Act of 1933
  • J.P. Morgan Securities was ordered to cease and desist from future violations of Section 17(a), pay $10 million disgorgement and $25 million civil penalty
  • Total payments across three actions exceed $920 million including criminal restitution, forfeiture, disgorgement, penalties, and fines
  • Jessica T. Quinn and Thomas P. Smith Jr. conducted SEC investigation supervised by Sanjay Wadhwa at New York Regional Office
PDF (from attached: pdf)
In re J.P. Morgan Securities LLC · Source
Text layers
Extracted body text (3,208c) 
The Securities and Exchange Commission today announced charges against J.P. Morgan Securities LLC, a broker-dealer subsidiary of JPMorgan Chase & Co., for fraudulently engaging in manipulative trading of U.S. Treasury securities. J.P. Morgan Securities admitted the findings in the SEC's order, and agreed to pay disgorgement of $10 million and a civil penalty of $25 million to settle the action. The U.S. Department of Justice and the U.S. Commodity Futures Trading Commission today announced parallel actions against JPMorgan Chase & Co. and certain of its affiliates for engaging in manipulative trading in the precious metals and U.S. Treasuries futures and cash markets. A total of more than $920 million, including amounts for criminal restitution, forfeiture, disgorgement, penalties, and fines, is to be paid across the three actions. The DOJ entered into a three-year deferred prosecution agreement with JPMorgan Chase & Co., whereas the CFTC announced settlements with J.P. Morgan Chase & Co., JPMorgan Chase Bank, N.A., and JPMorgan Securities. According to the SEC's order, between April 2015 and January 2016, certain traders on J.P. Morgan Securities' Treasuries trading desk employed manipulative trading strategies involving Treasury cash securities. The order finds that the traders placed bona fide orders to buy or sell a particular Treasury security, while nearly simultaneously placing non-bona fide orders, which the traders did not intend to execute, for the same series of Treasury security on the opposite side of the market. The order finds that the non-bona fide orders were intended to create a false appearance of buy or sell interest, which would induce other market participants to trade against the bona fide orders at prices that were more favorable to J.P. Morgan Securities than J.P. Morgan Securities otherwise would have been able to obtain. According to the order, after the traders secured beneficially priced executions for the bona fide orders, they promptly cancelled the non-bona fide orders. "J.P. Morgan Securities undermined the integrity of our markets with this scheme," said Stephanie Avakian, Director of the SEC's Division of Enforcement. "Their manipulative trading of Treasury cash securities created a false appearance of activity in the market and induced other market participants to trade at more favorable prices than J.P. Morgan Securities would have otherwise been able to obtain." J.P. Morgan Securities agreed to the entry of an order in which it admitted to the SEC's factual findings and that its conduct violated Section 17(a)(3) of the Securities Act of 1933. J.P. Morgan Securities was further ordered to cease and desist from future violations of Section 17(a), was censured, and was ordered to pay disgorgement of $10 million and a civil penalty of $25 million. The civil penalty ordered will be offset by amounts paid by JPMorgan Chase & Co. and its affiliates in the parallel proceedings announced by the DOJ and the CFTC. The SEC's investigation was conducted by Jessica T. Quinn and Thomas P. Smith, Jr., and supervised by Sanjay Wadhwa, all of the New York Regional Office. The SEC appreciates the assistance of the DOJ and the CFTC.
OCR text (3,208c · html-text · 99% conf) 
The Securities and Exchange Commission today announced charges against J.P. Morgan Securities LLC, a broker-dealer subsidiary of JPMorgan Chase & Co., for fraudulently engaging in manipulative trading of U.S. Treasury securities. J.P. Morgan Securities admitted the findings in the SEC's order, and agreed to pay disgorgement of $10 million and a civil penalty of $25 million to settle the action. The U.S. Department of Justice and the U.S. Commodity Futures Trading Commission today announced parallel actions against JPMorgan Chase & Co. and certain of its affiliates for engaging in manipulative trading in the precious metals and U.S. Treasuries futures and cash markets. A total of more than $920 million, including amounts for criminal restitution, forfeiture, disgorgement, penalties, and fines, is to be paid across the three actions. The DOJ entered into a three-year deferred prosecution agreement with JPMorgan Chase & Co., whereas the CFTC announced settlements with J.P. Morgan Chase & Co., JPMorgan Chase Bank, N.A., and JPMorgan Securities. According to the SEC's order, between April 2015 and January 2016, certain traders on J.P. Morgan Securities' Treasuries trading desk employed manipulative trading strategies involving Treasury cash securities. The order finds that the traders placed bona fide orders to buy or sell a particular Treasury security, while nearly simultaneously placing non-bona fide orders, which the traders did not intend to execute, for the same series of Treasury security on the opposite side of the market. The order finds that the non-bona fide orders were intended to create a false appearance of buy or sell interest, which would induce other market participants to trade against the bona fide orders at prices that were more favorable to J.P. Morgan Securities than J.P. Morgan Securities otherwise would have been able to obtain. According to the order, after the traders secured beneficially priced executions for the bona fide orders, they promptly cancelled the non-bona fide orders. "J.P. Morgan Securities undermined the integrity of our markets with this scheme," said Stephanie Avakian, Director of the SEC's Division of Enforcement. "Their manipulative trading of Treasury cash securities created a false appearance of activity in the market and induced other market participants to trade at more favorable prices than J.P. Morgan Securities would have otherwise been able to obtain." J.P. Morgan Securities agreed to the entry of an order in which it admitted to the SEC's factual findings and that its conduct violated Section 17(a)(3) of the Securities Act of 1933. J.P. Morgan Securities was further ordered to cease and desist from future violations of Section 17(a), was censured, and was ordered to pay disgorgement of $10 million and a civil penalty of $25 million. The civil penalty ordered will be offset by amounts paid by JPMorgan Chase & Co. and its affiliates in the parallel proceedings announced by the DOJ and the CFTC. The SEC's investigation was conducted by Jessica T. Quinn and Thomas P. Smith, Jr., and supervised by Sanjay Wadhwa, all of the New York Regional Office. The SEC appreciates the assistance of the DOJ and the CFTC.

Related documents (1)