J.P. Morgan Securities agreed to resolve allegations by the Securities and Exchange Commission (SEC) alleging that it engaged in fraudulent manipulative trading of U.S. Treasury securities for almost a year.
According to the SEC, J.P. Morgan Securities submitted an offer of settlement in anticipation of the institution of an administrative proceeding against it. The New York-based broker-dealer, investment adviser, and a wholly-owned subsidiary of JPMorgan Chase & Company (NYSE: JPM) admitted the Commission’s allegations.
As part of the settlement, J.P. Morgan Securities consented to the SEC Order requiring it to pay a total of $35 million including disgorgement of $10 million and a civil penalty of $25 million.
The broker-dealer and investment adviser also agreed to cease-and-desist from committing or causing any future violations of federal securities laws.
SEC charges against J.P. Morgan Securities
In the SEC Order, the SEC alleged that certain traders at J.P. Morgan Securities trading des practice a manipulative trading scheme involving Treasury cash securities between April 2015 and 2016.
The traders allegedly placed bona fide orders to buy and sell Treasury securities while almost at the same time placing non-bonafide orders on the opposite side of the market for the same Treasury securities, which they have no intention to execute.
The SEC alleged that the traders used the non-bonafide orders to create a false appearance of a buy or sell interest, which would lure others to trade against the bona fide orders at prices that are more favorable to J.P. Morgan Securities. They immediately canceled the non-bonafide orders after obtaining beneficially priced executions for their bona fide orders.
In a statement, SEC Division of Enforcement Director Stephanie Avakian said, “J.P. Morgan Securities undermined the integrity of our markets with this scheme. Their manipulative trading of Treasury cash securities created a false appearance of activity in the market and induced other market participants to trade at more favorable prices than J.P. Morgan Securities would have otherwise been able to obtain.”
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