Summary
J.P. Morgan Chase & Co. (JPM) filed an 8-K on October 1, 2003, disclosing an agreement with the Securities and Exchange Commission (SEC) to resolve matters concerning J.P. Morgan Securities Inc.'s (JPMSI) initial public offering (IPO) allocation practices. While JPMSI did not admit or deny the allegations, the firm agreed to an injunction preventing future violations and to pay a $25 million civil penalty. This settlement addresses SEC allegations that JPMSI violated Rule 101 of Regulation M by soliciting aftermarket orders for IPO shares before IPOs were finalized. Additionally, the firm was accused of violating NASD Conduct Rule 2110 regarding "just and equitable principles of trade" by conditioning allocations of oversubscribed IPO shares on customers accepting shares in less desirable, "cold" IPOs. Importantly, the Firm stated it would not be taking a charge to earnings related to this settlement, indicating the financial impact is considered contained.
Key Highlights
- 1J.P. Morgan Securities Inc. (JPMSI), a JPM subsidiary, settled with the SEC regarding IPO allocation practices.
- 2The settlement involves allegations of violating SEC Rule 101 of Regulation M and NASD Conduct Rule 2110.
- 3JPMSI agreed to pay a $25 million civil penalty.
- 4The firm will be subject to an injunction prohibiting future violations of the mentioned rules.
- 5JPMSI did not admit or deny the SEC's allegations.
- 6J.P. Morgan Chase & Co. will not incur an earnings charge as a result of this settlement.