JPMorgan, Credit Suisse settle with SEC for $417 million

Fri Nov 16, 2012 4:54pm EST
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By Aruna Viswanatha and Jonathan Stempel

WASHINGTON/NEW YORK (Reuters) - JPMorgan Chase & Co (JPM.N: Quote) and Credit Suisse Group AG CSGN.VX will pay a combined $416.9 million to settle U.S. civil charges that they misled investors in the sale of risky mortgage bonds prior to the 2008 financial crisis, regulators said on Friday.

JPMorgan will pay $296.9 million, while Credit Suisse will pay $120 million in a separate case, with the money going to harmed investors, the U.S. Securities and Exchange Commission said.

Both settlements addressed alleged negligence or other wrongdoing in the packaging and sale of risky residential mortgage-backed securities (RMBS), including at the former Bear Stearns Cos which JPMorgan bought in 2008.

The banks settled without admitting wrongdoing, and in separate statements said they were pleased to settle.

"In many ways, mortgage products such as RMBS were ground zero in the financial crisis," SEC enforcement chief Robert Khuzami said in a statement. "Misrepresentations in connection with the creation and sale of mortgage securities contributed greatly to the tremendous losses suffered by investors once the U.S. housing market collapsed."


Each settlement is significantly less than the $550 million that Goldman Sachs Group Inc (GS.N: Quote) agreed to pay in 2010, also without admitting wrongdoing, to settle SEC charges that it misled investors in a complex mortgage bond transaction.

They are also the latest SEC settlements not to punish individuals. In July, the SEC lost its first financial crisis-related trial against an individual when a Manhattan federal jury cleared former Citigroup Inc (C.N: Quote) mid-tier executive Brian Stoker of wrongdoing in the sale of a mortgage bond transaction.   Continued...

A sign for the Securities and Exchange Commission (SEC) is pictured in the foyer of the Fort Worth Regional Office in Fort Worth, Texas June 28, 2012. REUTERS/Mike Stone