JPMorgan Admits to Widespread Recordkeeping Failures, Agrees to Pay $125M
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In the end, it left the impression on me that Putin is just a player or a puppet who owes a lot of people.
The influence of the Koch's or Adelson is largely hinged on the fact that Americans don't use critical thinking when consuming their media. Rather than trying to find a way to wiggle around the first ammendment when it comes to spending on speech, why not try to build an electorate capable of critical thinking? If you don't think that's possible, then what's the point of any of this?
> Get rid of them! You can do that here
No you cannot, the US has gerrymandering which makes it very difficult to get rid of politicians in local/state races.
I work in the same kind of company and Im baffled, I wouldnt dare say the name of a client on whatsapp and sometimes the regulated chat system is so inconvenient I have to use some personal device but we usually do it to "ping" people so they then go to the recorded system.
And that they seem to have used it for decision taking, not just random discussion at the bar, means every low level employee who ever gave a formal report or raised a formal question without resending by email is wrong. Every.low.level.employee, yes.
Burn the top all you want, but at this point maybe the SEC should directly go to our companies fucking explain people that we must record all steps in decision making, not just for discovering fraud but to protect ourselves and our clients from suspicion in the first place.
Shocked that it happened at JPM. The SEC is also wrong to say: "Indeed, supervisors, including managing directors and other senior supervisors – the very people responsible for implementing and ensuring compliance with JPMS’s policies and procedures "!! No, EVEYONE is responsible, from the dimwit intern making coffee to the ferrari driving MD, record keeping is bank 101, this makes me boil for some reason. I d be such a pain in the ass of a big boss if I saw that where I work.
And you were born knowing this, or did someone have to model the proper behavior for you first?
So putting the blame at the top is easy, but there were lots of little hands in between who should face some reckoning imho. And I bet you the top will do nothing else than just say "dudes, for the nth time, please please please disobey orders that clearly contravene normal practice".
Talking business on whatsapp like the Mafia, what is this honestly.
So because the bosses have a rule written down somewhere, that absolves them of the responsibility to make sure their employees are actually following it?
It's probably still a slap, but I'd say a pretty significant one.
That being said, as a government you want to milk this cow, not slaughter it.
The SEC likes to go after these sorts of settlements, as they can post large dollar values without having to prove any actual harm. On the other side, these settlements are so common that they're just a cost of doing business, basically a tax.
LIBOR was probably manipulated by 1 basis point (0.01%), give or take. Even with $1bn notional deal, which is a very large one, the difference would be $25k for 3 month payment.
I mean, well, it's still pretty good money, but it's not like they made a couple of trillions and only paid a mere half-a-billion in fine.
The first one occured before the crisis. Swap traders asking money market traders to round their libor submission "the right way". That number got averaged across multiple banks, and the impact on the final fixing was likely of the order of a basis point or perhaps a fraction (per the regulator's report). 1 basis point may be small, but is a lot of money to an individual swap trader given the sort of position they must have had on libor futures (and that's money to the trader, not necessary to the rest of the bank who may have a net position the other way).
The second manipulation occured at the height of the financial crisis and is of a different nature. Because banks contributions to libor fixing were public, investors were infering from the submissions whether a bank was struggling to fund itself. At the height of the post-lehman panic, some banks decided to lower their submission to not look weak. In this case the order of magnitude would be much higher, in the 10s of basis points. You could argue the banks had a financial gain, but not from the direct impact on libor (it wasn't clear what their position was, though banks tend to be typically net receiver of libor), rather from the perception of not being in distress to investors.
It is rather the impact on every day borrowers that was tiny. First they would have to be unlucky enough to have their libor fixing falling on one of these 4 dates, even if it did, the impact would likely be a rounding error.
Interestingly I also did FX and people got done on that as well. There's this daily fixing that's used for a variety of products, and a big player like a bank would have a daily delta that would be very nice to nudge the right way each day. You could actually see at 1630 each day that something odd was going on, and there'd be a rumor to go along with it on the squawk box.
That being said, pretty much by nature of the deal the book is hedged - precisely to limit the exposure to LIBOR movements.
> As described in the SEC’s order, JPMS admitted that from at least January 2018 through November 2020, its employees often communicated about securities business matters on their personal devices, using text messages, WhatsApp, and personal email accounts. None of these records were preserved by the firm as required by the federal securities laws. JPMS further admitted that these failures were firm-wide and that practices were not hidden within the firm. Indeed, supervisors, including managing directors and other senior supervisors – the very people responsible for implementing and ensuring compliance with JPMS’s policies and procedures – used their personal devices to communicate about the firm’s securities business.
> its employees often communicated about securities business matters on their personal devices, using text messages, WhatsApp, and personal email accounts. None of these records were preserved by the firm as required by the federal securities laws. JPMS further admitted that these failures were firm-wide and that practices were not hidden within the firm. Indeed, supervisors, including managing directors and other senior supervisors – the very people responsible for implementing and ensuring compliance with JPMS’s policies and procedures – used their personal devices to communicate about the firm’s securities business.
At the end of the day, it's often more profitable, and in the shareholder's best interest to say I am sorry, vs. actually follow policy. At the end of the day, regardless if the C-level knew about it or not, they are accountable. And even if one of the largest banks in the US has to pay a relatively paltry fine like this, the CEO and the management chains that were participatory in this behavior should forgo bonuses. That will change things. Otherwise, this behavior will continue.
I guess it makes sense to ask then, do we want to have fines that are proportional to the revenue/profit/"X"-value of a business (and how might that get gamed)? Where if a small business is sued for something like this, it will only pay $100 while a larger business for the same infraction will pay $100,000,000? And if we're ok with that, are we ok then also acknowledging that we completely disincentive any sort of legal enforcement of small businesses, from a cost/benefit perspective?
I actually think the inverse is true: if the SEC has decided that the correct penalty for recordkeeping failures is $125M, it is likely a balance of proportionality to the crime, cost of enforcement, and proportion to victimhood of the crime. The question I always wonder around this is, how much of this $125M goes back towards victims (if any) and how much goes towards further agency enablement to pursue criminal activity? Is $125M enough for the SEC to open X more cases (knowing how overcapacity they and every other government agency are)?
> Narrator: A new car built by my company leaves somewhere traveling at 60 mph. The rear differential locks up. The car crashes and burns with everyone trapped inside. Now, should we initiate a recall? Take the number of vehicles in the field, A, multiply by the probable rate of failure, B, multiply by the average out-of-court settlement, C. A times B times C equals X. If X is less than the cost of a recall, we don't do one.
If the cost of the fine is less than the profit that can be made by ignoring it, it will get ignored. Especially because banks seem to have privatized profits and socialized losses. So I don’t think it should be necessarily proportional to a companies size but certainly a multiple of the cost of the externality. For example, if an oil company gets caught polluting, they should pay a big multiple of the damages so that it is ALWAYS cheaper ti invest in doing the right thing.
Also, the SEC is not a particularly popular organization and I think they have lost a lot of trust (if they ever really had any)
This cynical calculus should be separated from how we feel about the organizations that commit things that result in fines. It's really easy to hate on banks and believe that every fine is justified and should actually be way bigger. Pitchforks and burning down the barn, ya know? But someone somewhere decided that calculus of appropriateness based on a variety of factors, and it is the lowercase-p political process to push for changes based on outcomes we see. But the pendulum swings both ways. China is an example of a country where if a company goes against government rules it can be dissolved, its leaders arrested and thrown in prison, based on criteria they have calibrated politically. Or in some other countries, you may be beheaded for social infractions. Not trying to reduce this to absurd (but real) logical extremes, but highlighting that this is precisely the difficult balance folks try to find, and our sense of proportionality is often affected by the current popular conception of them as an industry or as an individual company/person. I.e., just as many people hate on banks and think they should be punished higher, they turn around express complete disbelief at "unfair" fines and laws that are broken by innovators that run faster than regulations allow (read: tesla, uber, airbnb, etc). Sometimes we collectively feel fines are justified, sometimes not, sometimes too high, sometimes too low. Your calibration may vary.
Isn't it likely that this someone now works for a large bank and directly profits from their previous generous decisions?
1: https://en.wikipedia.org/wiki/Punitive_damages#United_States
If you look at how many times have they been caught, the list is very, very long.
Yet every time there are no real consequences. A fine here and there and settlement agreements written in a way that nobody gets any trouble for anything. I'm actually surprised the bank admitted to anything this time. Usually they just pay a fine, and admit to nothing.
For heaven's sake, even HSBC drug cartel money laundering scandal results in not a single person going to prison or getting fired. HSBC even violated the additional rules they were supposed to be subjected to during a probation period after settling, and yet again nothing happened, except they paid a small(ish) fine.
The entire industry is completely lawless.
I’ve worked in banking and healthcare and it’s not unusual for the regulators to fine you for something you didn’t know about (not even your army of attorneys or compliance department), or fine you because you interpreted things differently and now they disagree. Sometimes you change your internal operations and technologies, spending big $$$, only to find you to find out about some new case law that opposes your original interpretation. Then, your faces with the question of do we go through a massive re-implementation/disruption, or do we just take the risk.
Usually, in my experience, the cost of fixing things internally far exceeds the cost of fines and so the business decisions often boil down to that simple ROI math.
Fines should have a minimum amount which should be designed to seriously cripple repeated bad actors and induce enough financial pain to force amending the fine-causing behavior.
From a cost-benefit perspective… yes it makes sense to go after bigger companies creating larger more impactful violations. No one reasonably expects a small business to be fined $125M…
In my view mere dollar fines are insufficient when it comes to fraud.
Then people lose jobs and that does not look good on TV.
I’ll leave it to you all to decide which course of action you think JP Morgan should take.
I don't doubt that some high value employees probably already have company phones. For the others, I wonder if they will have to surrender their phones to not use them during the day or to have the chat history, forfend, exported.
silicon valley created all these amazing tools for communication, people want to use them, and they don't play nicely with business requirements
almost like the only safe tool is email because it is so old they know how to handle it.
seems like an opportunity for better solutions?
https://www.jpmorganchase.com/content/dam/jpmc/jpmorgan-chas...