SEC CHARGES JP MORGAN & CREDIT SUISSE FOR MISLEADING INVESTORS
- November 19, 2012
- The Frankowski Firm
Once again JP Morgan has found itself in hot water with the SEC, this time alongside with Credit Suisse. The announcement came in a recent SEC News Digest that JP Morgan and Credit Suisse agreed to settlements to pay around $400 million dollars to investors harmed by their misleading information regarding residential mortgage backed securities.
The article alleged that Credit Suisse failed to accurately disclose that it retained some cash for itself when it settled claims against mortgage loan originators. Credit Suisse also was accused of making misleading statements in its SEC filings regarding its practice of repurchasing mortgage loans after a borrower missed the first payment due. Using these misleading and fraudulent techniques, Credit Suisse allegedly made $55.7 million in profits while investors lost more than $10 million. Credit Suisse agreed to pay $120 million as settlement to the SEC for the harmed investors.
JP Morgan agreed to pay $296.9 million to settle the newest set of charges against them, according to the SEC News Digest. All of the monies paid by JP Morgan, and Credit Suisse, will be distributed to harmed investors by the SEC. The charges against JP Morgan dealt with misstatements JP Morgan allegedly made regarding the delinquency status of RMBS collateral mortgage based loans in which JP Morgan was the underwriter. JP Morgan is charged with Bear Stearns’ failure to disclose it keeping cash settlements paid by mortgage loan originators. All in all, JP Morgan allegedly gained around $2.7 million while costing investors $37 million. The SEC also alleged that JP Morgan made materially false and misleading statements in the prospectus for the $1.8 billion RMBS offering. Those misleading and false statements concerned the loans that provided the collateral for the RMBS transaction and many investors relied on these misleading statements to their detriment.
The SEC worked this case along with the federal-state Residential Mortgage backed Securities Working Group. Both groups hold that many mortgage products, such as the RMBS products at the heart of this matter, were “ground zero” in the financial crisis. The RMBS Working Group and the US Attorneys associated with them have a joint goal- investigating and confronting abuses in the RMBS securities market that contributed to the financial crisis. The SEC and the RMBS Working Group intend to hold those who misled investors accountable for their actions, according to Kenneth Lench, Chief of the SEC Enforcement Division’s Structured and New Products Unit.