JP Morgan Chase 2015 Annual Report Download - page 307

JPMorgan Chase & Co./2015 Annual Report 297
Note 31 – Litigation
Contingencies
As of December 31, 2015, the Firm and its subsidiaries and
affiliates 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 $3.6 billion at December 31, 2015. This
estimated aggregate range of reasonably possible losses is
based upon currently available information for those
proceedings in which the Firm believes that an estimate of
reasonably possible loss can be made. For certain matters,
the Firm does not believe that such an estimate can be
made. The Firm’s estimate of the aggregate range of
reasonably possible losses involves significant judgment,
given the number, variety and varying stages of the
proceedings (including the fact that many are 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 significantly.
Set forth below are descriptions of the Firm’s material legal
proceedings.
Auto Dealer Regulatory Matter. The U.S. Department of
Justice (“DOJ”) is investigating potential statistical
disparities in markups charged to borrowers of 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 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”). A settlement of the shareholder
class action, under which the Firm will pay $150 million,
has been preliminarily approved by the court. The putative
ERISA class action has been dismissed, and plaintiffs have
filed a notice of appeal. Six of the seven shareholder
derivative actions have been dismissed.
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 asserted 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. In December 2015, the EC announced the
closure of its investigation as to the Firm and other
investment banks.
Separately, the Firm and other defendants have entered
separate agreements to settle 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 in this action had alleged 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. These settlements are subject to Court approval.
Custody Assets Investigation. The U.K. Financial Conduct
Authority (“FCA”) has closed its previously-reported
investigation concerning compliance by JPMorgan Chase
Bank, N.A., London branch and J.P. Morgan Europe Limited
with the FCA’s rules regarding the provision of custody
services relating to the administration of client assets.
Foreign Exchange Investigations and Litigation. The Firm
previously reported settlements with certain government
authorities relating to its foreign exchange (“FX”) sales and
trading activities and controls related to those activities. FX-
related investigations and inquiries by other, non-U.S.
government authorities, including competition authorities,
remain ongoing, and the Firm is cooperating with those
matters.
The Firm is also one of a number of foreign exchange
dealers defending a class action filed in the United States
District Court for the Southern District of New York by U.S.-
based plaintiffs, principally alleging violations of federal
antitrust laws based on an alleged conspiracy to manipulate
foreign exchange rates (the “U.S. class action”). In January
2015, the Firm entered into a settlement agreement in the
U.S. class action. Following this settlement, a number of
additional putative class actions were filed seeking damages
for persons who transacted FX futures and options on
futures (the “exchanged-based actions”), consumers who
purchased foreign currencies at allegedly inflated rates (the
“consumer actions”), and participants or beneficiaries of
qualified ERISA plans (the “ERISA actions”). In July 2015,
the plaintiffs in the U.S. class action filed an amended
complaint, and the Court consolidated the exchange-based