CFTC orders JPMorgan to pay $20 million in Lehman case

Wed Apr 4, 2012 5:43pm EDT
 
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By Philip Shishkin and David Henry

WASHINGTON (Reuters) - The Commodity Futures Trading Commission said on Wednesday that JPMorgan Chase & Co (JPM.N: Quote) will pay $20 million to settle charges that it unlawfully handled customer segregated funds at Lehman Brothers Holdings Inc.

The action comes as the CFTC and other regulators continue to probe what happened to segregated customer funds in the October 2011 collapse of MF Global Holdings Ltd MFGLQ.PK, a commodity trading firm that also did business with JPMorgan.

In the Lehman case, the CFTC said that for about 22 months, ending with Lehman's bankruptcy in September 2008, JPMorgan had improperly extended intra-day credit to Lehman Brothers based in part on customers' segregated funds Lehman had deposited at the bank.

JPMorgan also violated rules by refusing to release customers' segregated funds for nearly two weeks after the bankruptcy, the CFTC said.

In a statement, JPMorgan said it "mistakenly factored the balance in the account into a daily calculation of (Lehman) assets to determine the amount of credit the firm was willing to extend to (Lehman)."

JPMorgan went on to say that "no customer funds were ever used to satisfy any (Lehman) debt to JPMorgan, nor were any funds in these accounts lost."

Lehman spokeswoman Kimberly Macleod declined to comment.

The issue of how JPMorgan handled customer funds of another brokerage also emerged in the ongoing investigation into MF Global. JP Morgan played an important role in MF Global's final hours, as the firm struggled to meet its trading commitments amid a growing customer unease over the brokerage's big bets on European sovereign debt.   Continued...

 
A sign is seen outside the JPMorgan office in Los Angeles, California, October 12, 2010. REUTERS/Lucy Nicholson (