JPMORGAN CHASE WHALE TRADES: A CASE HISTORY OF DERIVATIVES RISKS AND ABUSES

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the ill-fated trades had already been made. 914 In addition, unlike other JPMorgan Chase lines of
business, the CIO’s Risk Committee typically did not invite outside personnel to its meetings to
review its trading strategies and risk profile. According to the 2013 JPMorgan Chase Task Force
Report: “There was no official membership or charter for the CIO Risk Committee and
attendees typically included only personnel from CIO …. Had there been senior traders or risk
managers from outside CIO or had the CIO Risk Committee met more often, the process might
have been used to more pointedly vet the traders’ strategies in the first quarter of 2012.” 915
Even if the role of CIO Chief Risk Officer had been filled earlier, the reporting lines had
been clear, and the CIO Risk Committee had met more often, there is little evidence that these
changes would have prevented Mr. Iksil from pursuing the trading strategy that he and Mr.
Martin-Artajo had devised. Mr. Macris had approved the strategy, which was within the
authority that Ms. Drew had delegated to him. 916 At the CIO, in 2011 and early 2012, risk
managers played no role in evaluating and approving trading strategies. 917 Mr. Weiland
explained to the Subcommittee that his role as a risk manager was descriptive, rather than
prescriptive. 918 He said that he acted as a “middleman” who “coordinated” between the risk
modelers and the traders and managers to ensure that the risk metrics were properly calculated
and disseminated to decision makers. Mr. Weiland told the Subcommittee that he described the
risks that existed in the portfolio, but did not challenge trading decisions. According to Mr.
Weiland, the CIO's risk appetite was set by members of the bank’s Operating Committee, and it
was up to Ms. Drew rather than to the risk personnel to enforce the risk limits. 919
Mr. Weiland’s passive role as a risk manager meant that when the SCP began causing the
CIO to breach its risk limits in January 2012, he did not enforce those limits, or direct the traders
to exit any positions. In fact, beginning with the VaR breaches in January, he repeatedly worked
with CIO traders and quantitative analysts to challenge or modify the risk metrics, or approve
limit increases or exemptions. 920
Given Mr. Weiland’s perception of his role and Mr. Goldman’s inexperience as a risk
manager, neither attempted to constrain the CIO trading strategies. In addition, by his own
admission, Mr. Hogan told the Subcommittee that he was not focused on the Synthetic Credit
Portfolio until after the media broke the news of the whale trades in April. 921
Mr. Hogan stated
that until the stories broke, his first priority had been to understand the bank's consumer
914
See 2013 JPMorgan Chase Task Force Report at 100; 3/28/2012 Outlook Calendar Appointment, “CIO RISK
COMMITTEE (Attachment Below),” JPM-CIO-PSI-H 0006401-6437.
915
2013 JPMorgan Task Force Report, at 100.
916
Subcommittee interview of Ina Drew, CIO (9/7/2012).
917
Subcommittee interview of Peter Weiland, CIO (8/29/2012); 2013 JPMorgan Chase Task Force Report, at 100
(“Although the CIO had long tenured risk personnel in less senior positions … they appear not to have been
expected, encouraged or supported sufficiently by CIO management or by the Firm-wide Risk organization to stand
up forcefully to the CIO front office and to vigorously question and challenge investment strategies within the
CIO.”) In addition, although risk managers were asked to provide input for the CIO traders’ 2011 annual
performance review, their input did not raise any risk management concerns. 2013 JPMorgan Chase Task Force
Report, at 92.
918
Subcommittee interview of Peter Weiland, CIO (8/29/2012).
919
Id.
920
See Section D “Disregarding CIO Risk Metrics,” below.
921
Subcommittee interview of John Hogan and Ashley Bacon, JPMorgan Chase (9/4/2012).