“JPMorgan’s senior management broke a cardinal rule of corporate governance: inform your board of directors of matters that call into question the truth of what the company is disclosing to investors,” said Canellos.
New York-based JPMorgan called the settlements “a major step” in its efforts to put its legal problems behind it. The bank said it cooperated fully with all of the agencies’ investigations and continues to cooperate with the Justice Department in its criminal prosecution of the two former traders.
“We have accepted responsibility and acknowledged our mistakes from the start, and we have learned from them and worked to fix them,” JPMorgan CEO Jamie Dimon said in a statement.
By requiring the bank to accept some blame, regulators hope it will warn other companies to think twice before taking extreme risks that threaten the broader financial system.
The SEC had faced sharp criticism for taking too soft an approach with its enforcement after the 2008 financial crisis.
Banks accused of misleading investors about risky investments ahead of the crisis, including Goldman Sachs, JPMorgan and Citigroup, were allowed to pay fines without admitting or denying fault — a long-standing policy at the SEC.
But that changed with Chairman Mary Jo White. She took over at the agency this year and vowed to end the practice in extreme cases. Now, financial companies face the prospect of either admitting wrongdoing in a settlement or fighting the SEC in court.
“Clearly the tide is changing,” said Mark Williams, a finance professor at Boston University and former bank examiner for the Federal Reserve. “There’s definitely a toughness that’s coming out of these settlements.”
JPMorgan was one of the few financial institutions to come through the financial crisis without suffering major losses. But when the multi-billion-dollar trading loss surfaced in April 2012, it raised new worries that banks had not learned their lesson of risk-taking from the crisis.