JP Morgan Chase 2014 Annual Report Download - page 297

JPMorgan Chase & Co./2014 Annual Report 295
Note 31 – Litigation
Contingencies
As of December 31, 2014, the Firm and its subsidiaries are
defendants or putative defendants in numerous legal
proceedings, including private, civil litigations and
regulatory/government investigations. The litigations range
from individual actions involving a single plaintiff to class
action lawsuits with potentially millions of class members.
Investigations involve both formal and informal
proceedings, by both governmental agencies and self-
regulatory organizations. These legal proceedings are at
varying stages of adjudication, arbitration or investigation,
and involve each of the Firm’s lines of business and
geographies and a wide variety of claims (including
common law tort and contract claims and statutory
antitrust, securities and consumer protection claims), some
of which present novel legal theories.
The Firm believes the estimate of the aggregate range of
reasonably possible losses, in excess of reserves
established, for its legal proceedings is from $0 to
approximately $5.8 billion at December 31, 2014. This
estimated aggregate range of reasonably possible losses is
based upon currently available information for those
proceedings in which the Firm is involved, taking into
account the Firm’s best estimate of such losses for those
cases for which such estimate can be made. For certain
cases, the Firm does not believe that an estimate can
currently be made. The Firm’s estimate involves significant
judgment, given the varying stages of the proceedings
(including the fact that many are currently in preliminary
stages), the existence in many such proceedings of multiple
defendants (including the Firm) whose share of liability has
yet to be determined, the numerous yet-unresolved issues
in many of the proceedings (including issues regarding class
certification and the scope of many of the claims) and the
attendant uncertainty of the various potential outcomes of
such proceedings, particularly proceedings that could result
from government investigations. Accordingly, the Firm’s
estimate will change from time to time, and actual losses
may vary.
Set forth below are descriptions of the Firm’s material legal
proceedings.
Auto Dealer Regulatory Matter. The Firm is engaged in
discussions with the U.S. Department of Justice (“DOJ”)
about potential statistical disparities in markups charged to
different races and ethnicities by automobile dealers on
loans originated by those dealers and purchased by the
Firm.
CIO Litigation. The Firm has been sued in a consolidated
shareholder putative class action, a consolidated putative
class action brought under the Employee Retirement
Income Security Act (“ERISA”) and seven shareholder
derivative actions brought in Delaware state court and in
New York federal and state courts relating to 2012 losses in
the synthetic credit portfolio managed by the Firm’s Chief
Investment Office (“CIO”). Four of the shareholder
derivative actions have been dismissed, and plaintiffs in
three of those actions have appealed those dismissals.
Motions to dismiss have also been filed in two other
shareholder derivative actions.
Credit Default Swaps Investigations and Litigation. In July
2013, the European Commission (the “EC”) filed a
Statement of Objections against the Firm (including various
subsidiaries) and other industry members in connection
with its ongoing investigation into the credit default swaps
(“CDS”) marketplace. The EC asserts that between 2006
and 2009, a number of investment banks acted collectively
through the International Swaps and Derivatives Association
(“ISDA”) and Markit Group Limited (“Markit”) to foreclose
exchanges from the potential market for exchange-traded
credit derivatives. The Firm submitted a response to the
Statement of Objections in January 2014, and the EC held a
hearing in May 2014. DOJ also has an ongoing investigation
into the CDS marketplace, which was initiated in July 2009.
Separately, the Firm and other industry members are
defendants in a consolidated putative class action filed in
the United States District Court for the Southern District of
New York on behalf of purchasers and sellers of CDS. The
complaint refers to the ongoing investigations by the EC and
DOJ into the CDS market, and alleges that the defendant
investment banks and dealers, including the Firm, as well as
Markit and/or ISDA, collectively prevented new entrants into
the market for exchange-traded CDS products. Defendants
moved to dismiss this action, and in September 2014, the
Court granted defendants’ motion in part, dismissing claims
for damages based on transactions effected before the
Autumn of 2008, as well as certain other claims.
Foreign Exchange Investigations and Litigation. In November
2014, JPMorgan Chase Bank, N.A. reached separate
settlements with the U.K. Financial Conduct Authority
(“FCA”), the U.S. Commodity Futures Trading Commission
(“CFTC”) and the U.S. Office of the Comptroller of the
Currency (“OCC”) to resolve the agencies’ respective civil
enforcement claims relating to the Bank’s foreign exchange
(“FX”) trading business (collectively, the “Settlement
Agreements”). Under the Settlement Agreements, JPMorgan
Chase Bank, N.A. agreed to take certain remedial measures
and paid penalties of £222 million to the FCA, $310 million
to the CFTC and $350 million to the OCC.
In December 2014, the Hong Kong Monetary Authority
(“HKMA”) announced the conclusion of its FX-related
investigation regarding JPMorgan Chase Bank, N.A. and
several other banks. The HKMA required the banks,
including JPMorgan Chase Bank, N.A., to take certain
remedial measures.
Other FX-related regulatory investigations of the Firm are
ongoing, including a criminal investigation by DOJ. These
investigations are focused on the Firm’s spot FX trading and
sales activities as well as controls applicable to those
activities. The Firm continues to cooperate with these
investigations. The Firm is also engaged in discussions
regarding potential resolution with DOJ.