Back to top

Analyst Blog

Financial Times has reported that the legal woes at JPMorgan Chase & Co. (JPM - Analyst Report) are expected to lessen soon. The company is in advanced talks with the Securities and Exchange Commission (SEC) for the settlement of probes related to the sale of risky residential mortgage-backed securities (RMBS).

The allegation pertains to how Bear Stearns Cos. – acquired by JPMorgan in 2008 – repackaged and sold residential loans to the investors. The SEC is conducting an inquiry into accusations against Bear Stearns that claimed that after receiving compensation from the loan originators for failed mortgages, the firm did not transfer the same to a trust that was managing RMBS. Moreover, the SEC is probing disclosures made to the investors regarding the renegotiated loans.

Further, both the parties of the settlement deal are yet to agree upon the penalty to be paid and the other conditions to be fulfilled. However, JPMorgan’s fine is not expected to exceed the penalty paid by The Goldman Sachs Group, Inc. (GS - Analyst Report) in 2010. Goldman had paid $550 million to settle the SEC allegation of misleading investors in collateralized debt obligation (CLO) – Abacus 2007-AC1.

Apart from JPMorgan, the other large banks that are facing the SEC inquiry for selling risky RMBS include Citigroup, Inc. (C - Analyst Report), Credit Suisse Group (CS - Snapshot Report) and Wells Fargo & Company (WFC - Analyst Report).

If the settlement with JPMorgan is finalized, it will be a major victory for the SEC, which has been investigating the role of these securities prior to the financial crisis. For JPMorgan, this would be a breather as it would slightly lower the legal and regulatory inquiries it has been encountering since the financial crisis.

Yet, JPMorgan continues to face many other probes and lawsuits from the investors and regulators pertaining to its role during the crisis. Along with these, the company is facing investigations for the trading debacle it reported in May this year, its alleged role in rigging the LIBOR rates and for money laundering.

JPMorgan currently retains a Zacks #2 Rank, which translates into a short-term Buy rating. However, considering the fundamentals, we maintain a long-term ‘Neutral’ recommendation on the stock.

Please login to or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research


Are you a new Zacks Member or a visitor to

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
PLANAR SYST… PLNR 4.44 +5.21%
BITAUTO HOL… BITA 81.71 +5.12%
CTPARTNERS… CTP 16.66 +4.26%
CHINA BIOLO… CBPO 47.91 +3.30%
MALLINCKROD… MNK 72.94 +2.85%