JPMorgan in Talks to Settle Metal, Treasuries Spoofing Probe
JPMorgan JPM is in advanced discussions with the U.S. authorities to resolve spoofing allegations into its trading of metals futures and Treasury securities. The bank is likely to pay a fine of almost $1 billion, first revealed by Bloomberg, to settle the issue as soon as this week.
The settlement deal will end investigations by the Justice Department, the Commodity Futures Trading Commission and the Securities and Exchange Commission.
Notably, JPMorgan is negotiating a deferred prosecution agreement, which allows it to continue with the trading operations, provided it fulfills certain conditions. Further, it is likely that the bank will admit to wrongdoing.
Spoofing is a method wherein the traders place orders that they intend to cancel in order to move the prices in a particular direction. While submitting and cancelling orders isn’t illegal, it is against the law to trick other traders with such strategy.
Spoofing was banned after the 2008 financial crisis under the Dodd Frank regulation.
The spoofing case against JPMorgan follows filing of criminal charges against its several employees. In its latest quarterly reported filed in July, the company confirmed the probe and stated that it is continuing “to cooperate with these investigations and is currently engaged in discussions with various regulators about resolving their respective investigations.”
The penalty to be paid by JPMorgan would be a record compared with other spoofing-related fines. Over the past few years, several other global banks like Deutsche Bank DB, UBS Group and HSBC Holdings HSBC have been fined over similar allegations.
Further, last month, Bank of Nova Scotia BNS agreed to pay $127.4 million to resolve U.S. allegations that it engaged in spoofing of gold and silver futures contracts. The bank admitted to wrongdoing.
Shares of JPMorgan have gained 1.1% over the past six months, underperforming the industry’s rally of 4.7%.
Currently, JPMorgan carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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