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JPMorgan to Pay $65 Million as Swap Rate Manipulation Charge

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The U.S. Commodities Futures Trading Commission (“CFTC”) has charged JPMorgan Chase & Co. (JPM - Free Report) with $65 million penalty for trying to manipulate ISDAfix rates — the benchmark rate for fixed interest rate swap rates — between 2007 and 2012. This is the latest fine that has been levied by a U.S. regulator on any large bank for its manipulation during the financial crisis.

Per the CFTC, employees at JPMorgan made false reports and attempted to manipulate the reference rate by “bidding, offering, and executing transactions in targeted interest rate products” during the five-year period.

The motive behind the manipulation was to benefit the banks’ derivative positions.

It is the ISDAfix rates through which option settlements on interest rate swaps and other related products are made. Generally, In order to hedge against interest rate risks, pension funds and local governments rely on products that are priced, using the benchmark rate.

James McDonald, the CFTC’s head of enforcement stated, “This matter is one in a series of CFTC actions that clearly demonstrates the commission’s unrelenting commitment to root out manipulation from our markets and to protect those who rely on the integrity of critical financial benchmarks.”

Jessica Francisco, a spokeswoman for JPMorgan informed, “We're pleased to have this matter behind us.”

Notably, apart from JPMorgan, other big banks like Goldman Sachs Group Inc. (GS - Free Report) , Barclays PLC (BCS - Free Report) and Citigroup (C - Free Report) had to pay penalties for rigging ISDAfix benchmark rates in 2015 and 2016.

While JPMorgan has resolved quite a lot of litigation issues by now, it still faces investigations from several federal agencies and a few foreign governments for its business conducts in the pre-crisis period. Legal expenses are expected to continue weighing marginally on the company’s bottom line in the near future.

Shares of the JPMorgan have gained 23.6% in the past year, outperforming 13% growth of the industry.


 

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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