Wednesday, 24 August 2016
Last updated 21 hours ago
Apr 5 2011 | 11:25am ET
JPMorgan Chase is looking to settle a regulatory investigation that parallels the Securities and Exchange Commission's case against Goldman Sachs last year.
As with the Goldman case, the SEC's probe of JPMorgan deals with its structuring and marketing of collateralized debt obligations. And as with the Goldman case, that structuring and marketing was allegedly done on behalf of a hedge fund, Goldman for Paulson & Co., JPMorgan for Magnetar Capital.
But unlike in the Goldman case, which was settled for $550 million only after the SEC filed a lawsuit, JPMorgan would apparently like to put the matter to bed before any formal allegations are made. The bank is in settlement talks that could produce a deal within weeks, the Financial Times reports.
What such a deal would look like is unclear; the SEC has been inquiring as to whether JPMorgan misled investors in a $1.1 billion CDO called "Squared." Magnetar plays the role of Paulson, with the regulator believing that the hedge fund had a hand in picking the mortgage-backed securities that went into the CDO without JPMorgan telling investors about it.
Magnetar has denied it played a decisive role in building the CDO, on which JPMorgan would lose some $880 million. Nor has the hedge fund been accused of any wrongoing.
Separately, the SEC this week warned Wachovia Corp., which was acquired two years about by Wells Fargo & Co., that it will likely face civil charges stemming from its own sale of CDOs. Unlike the Goldman and JPMorgan cases, however, hedge funds do not appear involved; the regulator instead believes that Wachovia overpriced the securities.