Please read http://sec.gov/litigation/investreport/34-61734.htm, the Securities and Exchange Commission's (SEC) just-issued Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934: JP Morgan Securities, Inc (the 21(a) Report) and please -- really, please -- tell me the name of JP Morgan Securities' Vice Chairman. You know, the Vice Chairman who is referred to on virtually every page of the 21(a) Report but whose name just seems to have escaped the SEC.
I mean, c'mon now, is this truly the "new" face of regulation. Or is this the same old two-faced nonsense that we were told was dead and buried.
To give you a start, consider this relevant section from the Report:
A. The Role of the Former Vice Chairman of JP Morgan Chase
After joining JP Morgan Chase in 2000 with responsibility for JP Morgan's retail and consumer banking business, the Vice Chairman relinquished those roles in July 2002 and assumed responsibility for JP Morgan Chase's global investment banking, asset management and private wealth businesses. The Vice Chairman reported exclusively to JP Morgan Chase's Chairman and CEO at the time. In press releases after the change, JP Morgan Chase often referred to the Vice Chairman as the "CEO" of JP Morgan Chase's Investment Bank. The Investment Bank included a number of legal entities. JPMSI, the registered broker-dealer, was the primary U.S.-based legal entity, and it conducted its business on a fully integrated basis. JPMSI operated seamlessly within the Investment Bank.
From July 2002 through September 2004, the Vice Chairman supervised the entire global investment banking business, which included municipal securities underwriting in the United States by JPMSI. During that time period, JPMSI was an important component of the business units under the Vice Chairman's supervision, generating significant operating revenues for the global investment bank. The Vice Chairman had full authority to hire or fire employees of the Investment Bank, including employees of JPMSI; he set the compensation pools for the various business lines within the Investment Bank that operated through JPMSI; resolved disputes within the Investment Bank that involved JPMSI; and oversaw transactions involving JPMSI's municipal finance department.
The Vice Chairman was the only JP Morgan Chase officer with responsibility for all businesses under the JPMSI umbrella. During the Vice Chairman's tenure as CEO of the JP Morgan Chase's Investment Bank, the head of JPMSI's public finance business reported indirectly to the Vice Chairman; periodically met with the Vice Chairman to brief him on public finance deals, and arranged for the Vice Chairman to participate in meetings with important public finance clients. While the Vice Chairman did not directly supervise managers in the public finance business, his direct reports, who were responsible for that line of business, regularly reported to him on the public finance business' performance.5
JPMSI did not have a chief executive officer or similarly situated official. While JPMSI had its own board of directors, the Board did not manage or control the business, but only met annually to address regulatory and perfunctory operational matters. Although JPMSI also had an executive committee, it never met. Therefore, it never functioned as a management subcommittee of the board. In fact, an officer in the Investment Bank who, for a period, served as "president" of JPMSI, testified that he "didn't remember the [JPMSI executive] committee ever doing anything or what the function of the committee was." JPMSI's "chairman and president" occupied a regulatory function, with no real authority over the various businesses conducted by JPMSI, and he served no functional role overseeing the public finance business.
The Vice Chairman did play a functional role in the public finance business by, among other things, actively promoting its services. For example, in October 2002, the Vice Chairman sent a pitch letter to JPMSI's public finance customers, who included, among others, state and municipal bond issuers. The letter also was subsequently included by the public finance department in at least eight responses to Requests for Qualifications ("RFQs") from municipal securities issuers between November 2002 and October 2003.
By virtue of his senior position within JP Morgan Chase, the Vice Chairman was a member of JP Morgan Chase's executive committee. According to the Vice Chairman, JP Morgan Chase's executive committee met one to three times a month to discuss JP Morgan Chase's "annual plan, the overall strategy, regular performance reviews, risk management activities, positioning in the markets in general, in communities in particular, and global functions throughout the organization." The executive committee provided "broad-banded oversight of the entire organization."RRBDLaw.com: New FINRA Cases Analyzed by Bill Singer
Regulatory lawyer Bill Singer has analyzed and posted the latest crop of FINRA disciplinary cases. Frankly, it's not a pretty sight.
- How simple is it to steal a quarter of a million in insurance premiums? How about you just submit a change of address form. CLICK HERE TO READ CASE
- Why accuse a broker of "forgery," when you can engage in prosaic pyrotechnics along the lines of "Davis falsified the customer's signature on the application and submitted it to his member firm as authentic, causing the firm's books and records to be false and inaccurate." CLICK HERE TO READ CASE
- The elderly have become attractive victims for many securities scams -- now we have a case where a supervisor is nailed for failing to properly supervise a miscreant who was ripping off the aged. CLICK HERE TO READ CASE
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