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Jp Morgan Chase Settles the London Whale

In: Business and Management

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IRAC Brief: JP Morgan Chase Settles the London Whale
This is a case study analysis of a current legal case regarding the governance principles of regulatory compliance and the methods used to manage risk arising. The briefing of this case will utilize the IRAC method of case analysis to give a breakdown on the case of JP Morgan Chase on regulatory violations and risk management. The IRAC method will address I - Issue, R - Rule, A - Analysis, and C - Conclusion which will provide a researched assessment of the trading loss violations on this case. Please read and review this analysis of the case utilizing IRAC method of case analysis.
Issue
JP Morgan Chase permitted traders in its London office to allocate magnified values to transactions and cover up huge losses as they continued to explode. Two traders could face criminal charges for fabricating records to cover up losses. JP Morgan’s charge to the $6 billion oversight in trading loss is the first for a main company since the Securities and Exchange Commission revised its practice of letting firms pay fines without admitting fault.
An admission by JPMorgan could provide a pattern for pursuing other admissions in Wall Street cases. The Justice Department is aggressive in getting JPMorgan to admit that from 2005 to 2007, it sold mortgage securities to investors without fully warning of the risks. By wanting the bank to admit some responsibility, officials hope it will caution other corporations to double check before taking dangerous risks that threaten the wide-ranging financial system. Rule The relevant rule of the JP Morgan Case requires that companies successfully mitigate risk of trading losses through internal controls and to disclose losses using transparency. According to CNN Money, “In legal language, regulators said that the bank engaged in “unsafe and unsound practices” (Isidore & O’Toole, 2013, para. 1). The unsafe business practices and lack of executive oversight led to a $6 billion loss. To make matters worse, “JPMorgan has previously said it has recordings, e-mails and other documents that suggest its traders may have been hiding the losses as they ballooned” (Isidore & O’Toole, 2013, para. 16). The rule states that JP Morgan must monitor effectively and manage trading losses through effective internal controls and executive oversight. In the event that losses do occur, JP Morgan is responsible for reporting these findings to its shareholders.

Analysis Regulations regarding trade losses have been put into place in accordance to the Securities and Exchange Commission and the Commodity Futures Trading Commission. The laws enforced investigate and execute its law enforcement function of securities law violations and wrongful trade exchanges. In the JPMorgan Chase settlement the bank admitted fault in misconduct as it prides itself on ability to manage risk. JPMorgan Chase is impacted in the sense of the regulatory agencies monitoring every practice and mortgage loan being made. Furthermore, the banks reputation is jeopardized, along with fines, which were to be paid among various commissions and compliance regulatory agents. The Bank admitted their wrongful doing in misleading investors about risk and trade, which presented possible private litigations uprising. With this noted the governance principles of regulatory compliance require that full compliance of national laws be in adhered to and that the soundness of principles as well as other standards for financial institutions. The undergoing of annual external audits within the end of a fiscal year and the audit relationship should be reexamined frequently in further consideration of changing the auditors every three to five years ("SEC.gov | How Investigations Work", 2013, p.1). However, JPMorgan Chase as a result will end of paying a large settlement; fines and all while being further investigated by regulatory and commission agents for their tortious acts in misleading investors, and their lack in managing and mitigate risk.

Conclusion
In conclusion, JPMorgan Chase has agreed to pay out $800 million to government agencies in Washington and London due to admittance of misconduct regarding trading. This case has determined that JPMorgan Chase manipulated their financial contracts to gain control with fraud and scandal. However, this case may be one reason of many why the federal statute must look into improving how corporate governance is regulated.
Learning Team A has demonstrated comprehension of the vital components and principles of this IRAC case study. The authors successfully addressed the four necessary components of the IRAC acronym: issue, rule, analysis, and conclusion. The team understands the governance principles of regulatory compliance requirements and the methods of managing legal risk arising from regulatory compliance issues with the JPMorgan Chase case. The authors understand the necessity for governing regulatory violations and risk management.

Reference
Cheeseman, H.R. (2013). Business law: Legal environment, online commerce, business, and international Issues (8th ed.). Upper Saddle River, NJ: Prentice Hall.
Isidore, C., & O’Toole, J. (2013, September 19). JPMorgan fined $920 million in ‘London Whale’ trading loss. CNN Money. Retrieved from http://money.cnn.com/2013/09/19/investing/jpmorgan-london-whale-fine/
Protess, B., & Silver-Greenberg, J. (2013, September 16). JP Morgan Chase is said to admit fault in settlement of trade loss. Retrieved from http://dealbook.nytimes.com/2013/09/16/jpmorgan-set-to-pay-fines-for-whale-trading-losses/?_r=0
SEC.gov | How Investigations Work. (2013). Retrieved from http://www.sec.gov/News/Article/Detail/Article/1356125787012#.Uok7wuKUeky

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