JPMorgan, Credit Suisse to Pay Hefty SEC Fines

Banking, finance, and taxes

Published: November 16, 2012 1:47 pm

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In an announcement that was telegraphed last week, the U.S. Securities and Exchange Commission (SEC) said today that JPMorgan Chase & Co. (NYSE: JPM) subsidiary J.P. Morgan Securities will pay $297 million to settle charges that it misled investors about a residential mortgage-backed security (RMBS) the bank issued and that Bear Stearns — which the bank bought in 2009 — failed to disclose its practice of keeping cash settlements from mortgage lenders on problem loans that the company had sold into RMBS trusts, something the banks call ‘put-back claims’. The SEC estimates that investors lost at least $175 million from the actions.

Credit Suisse Group (NYSE: CS) will pay $120 million to settle charges similar to those against Bear Stearns. The director of the SEC’s enforcement division said:

In many ways, mortgage products such as RMBS were ground zero in the financial crisis. Misrepresentations in connection with the creation and sale of mortgage securities contributed greatly to the tremendous losses suffered by investors once the U.S. housing market collapsed.

The worst could be yet to come for Morgan though. The bank still faces similar put-back claims on $140 billion in mortgage-backed notes. And while it is not on the hook for the entire amount, several billion dollars.

The SEC announcement is available here.

Paul Ausick

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