Bloomberg View columnist Jonathan Weil writes, “Once again the Securities and Exchange Commission has filed a complaint against a too-big-to- fail bank that hinges on the meaning of one word: “selected.” Last year, the bank was Goldman Sachs, which the SEC accused of intentional fraud. This week, the defendant was JPMorgan, which got far easier treatment.
Why the different approaches? The agency isn’t saying. Judging by the allegations, both companies in essence did the same thing. Yet JPMorgan caught a break, and Goldman didn’t.
The SEC says the securities arm of JPMorgan Chase & Co. (JPM) defrauded investors in a $1.1 billion bond deal called Squared CDO 2007-1. The SEC didn’t accuse the bank of defrauding anyone intentionally, however, only negligently. One quirk of the Securities Act of 1933 is that the courts have said the SEC need only show negligence to establish violations of the statute’s less-serious antifraud provisions. Hence, one of the great oxymorons of American legalese: “negligent fraud....”
The critical misrepresentation JPMorgan made was that the portfolio of mortgage-related investments underlying Squared was “selected” by a collateral manager named GSCP, according to the SEC’s complaint. That statement, contained in JPMorgan sales materials, wasn’t true, the SEC said. In fact, a hedge fund that shorted more than half of Squared’s portfolio, Magnetar Capital, had a significant role in selecting the collateral. That was something JPMorgan knew and that other investors weren’t told, the SEC said…
Find out more at http://www.bloomberg.com/news/2011-06-23/jpmorgan-gets-a-break-where-goldman-got-nailed-jonathan-weil.html
No comments:
Post a Comment