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

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operate the company. … [W]e admit it, we will learn from it, we will fix it, we
will move on, hopefully in the end, it will make us a better company.” 1472
In response to questions during the call, Mr. Dimon also said:
“You should assume that we try to keep our readers update[d] about what we
know and when we know it and it’s just a constant practice of the company. And
when I said, it was caught, we started [to] dig into this more and more, most of the
things were bearing big losses in the second quarter. And of course, when you
start to see something like that you act probably – obviously we should have acted
sooner.
[Analyst question]: [W]hen did the losses accumulate? [W]as this something that
happened most recently or this was an era in the past and is just updating your risk
amount now?
[Mr. Dimon]: There were small ones in the first quarter, but real ones that we
talked about the $2 billion were all in the second quarter. And it kind of grew as
the quarter went on. And obviously it got our attention, that and other things,
which came to our attention.” 1473
In July, the bank restated its earnings to increase its first quarter losses attributed to the SCP by
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$660 million, which the bank said fell to $459 million after taxes.
B. Securities Laws
To ensure fair, open and efficient markets for investors, federal securities laws impose
specific disclosure obligations on market participants. Under Securities and Exchange
Commission Rule 10b-5 1475 and Section 17(a) of the Securities Act of 1933, 1476
it is against the
law for issuers of securities to make untrue statements or omissions of material facts in
connection with the sale or purchase of securities. In the JPMorgan Chase case study examined
by the Subcommittee, the bank, as an issuer, has made disclosures that raise significant concerns
about the accuracy of the information it provided to investors and about omissions of key
information.
1472
5/10/2012 “Business Update Call,” JPMorgan Chase transcript, at 2-3, http://i.mktw.net/_newsimages/pdf/jpmconference-call.pdf.
1473
Id. at 4.
1474
7/13/2012 JPMorgan Chase & Co., Form 8-K,
http://files.shareholder.com/downloads/ONE/1934577619x0x582872/d38931ff-a849-41ed-a804a94aff313272/Restatement_8-K_Cover.pdf
(“On July 13, 2012, JPMorgan Chase & Co. reported that it will restate
its previously-filed interim financial statements for the first quarter of 2012. The restatement will have the effect of
reducing the Firm’s reported net income for the 2012 first quarter by $459 million (after-tax). The restatement
relates to valuations of certain positions in the synthetic credit portfolio of the Firm’s Chief Investment Office.”).
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SEC Rule 10b-5 makes it unlawful to “make any untrue statement of a material fact or to omit to state a material
fact necessary in order to make the statements made, in the light of the circumstances under which they were made,
not misleading.” 17 CFR Section 240.10b-5(b) (2011), adopted by the SEC pursuant to Section 10(b) of the
Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C § 78(j)(b) (2006).
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15 U.S.C. § 77q(a) (1976).