Court Approves JPMorgan Settlement With SEC

Jun 30 2011 | 1:49pm ET

JPMorgan Chase & Co will pay $153.6 million to settle SEC charges it defrauded investors with a mortgage CDO product.

The settlement was approved at a hearing in New York by U.S. District Judge Richard Berman, who said it was "another important step for the financial industry and the SEC in righting the wrongs of the recent financial crisis."

JPMorgan did not admit or deny wrongdoing in settling the charges, which stemmed from a security called “Squared CDO 2007-1.” The SEC alleges that the Chicago-based hedge fund Magnetar helped design Squared so that it could bet against it. JPMorgan sold the security to investors without disclosing the role played by Magnetar.

"By failing to disclose this, we allege that JPMorgan acted negligently, in violation of securities laws," the SEC's director of enforcement, Robert Khuzami, said.

JPMorgan sold $150 million of the Squared CDO notes to pension funds and other investors—the notes lost most of their value within 10 months.

The settlement recalls the July 2010 settlement under which Goldman Sachs Group  paid $550 million to settle similar charges related to its Abacus collateralized debt obligation.


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