In the world, of multi billion dollar markets, there is two ways to examine the markets. The markets are an example of supply and demand and the best information tends to rise to the top and eventually everyone has similar information or people will try to cheat. In the world of the large banks, they occassionally get caught cheating, but no one ever goes to jail. The bank agrees to pay money and admits some wrong doing but nothing illegal to send people to jail.
In these equations, the issue is did the bank make sufficient money to increase profits and pay bonuses and have enough to pay the fine in reserve? If they did, seemingly procedures are changed and life goes on.
In an article by Abhishek Manikandan and Michelle Price of Reuters, JPMorgan Chase & Co agreed to pay $920 million and admitted to doing wrong. The money was broken up to $436.4 million in fines, $311.7 million in restitution, and $172 million in disgorgement the Commodity Futures Trading Commission (CFTC) said. The fine was the biggest ever settlement imposed by the derivatives regulator.
What JPMorgan did between 2008 and 2016, was engaged in a pattern of manipulation in the precious futures and US Treasuries futures market. Traders would place orders on one side of the market they never intended to execute, to create a false impression of buy or sell interest that would raise or lower prices. The practice is known as spoofing.
Some of the trades were made on JPMorgan’s own account and some were made on behalf of hedge fund clients. The bank was warned about it in 2014 and instituted a new surveillance system but kept doing it anyways. Daniel Pinto, co-president of JPMorgan and chief executive of the Corporate and Investment Bank said the individuals who did the trades are no longer with the bank. (although it safe to say they left with bonuses in trac).
Mr. Pinto says the bank has invested considerable resources into boosting its internal compliance policies, surveillance systems and training programs.
The CFTC has been using more data analysis to spot potential wrongdoing and some of the ideas came from the health care fraud schemes. The CFTC and Justice Department mined the data to see how the worst actors were and surprising or not surprisingly came up with a big bank.
Linking to dividend paying stocks, any market where there is money to be lost or made, there will be some form of fraud. The wonderful analysis for a company actually doing things and making money can be use and are used for companies that have the potential to make money. To try to be as legal as possible, error on the side of investing in profitable companies which can sustain their dividends. No company is perfect, but one can determine the values of it when problems come up. How does the company deal with them under the pressures of consistently making money.
There are more questions than answers, till the next time – to raising questions.