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Screenshot of a breaking news alert e-mail from Q2 2017
Lesson learned? Right or wrong, don’t (overly) fight your regulator.
In normal times, a $100 million fine levied against a respected, regulated, licensed broker would make headlines. Big headlines. But today’s announcement that the CFTC, with its staff now back at work after the US Government shutdown, has fined JP Morgan (NYSE:JPM) $100 million over the London Whale swaps trade fiasco passed with barely a mention.
The reason, of course, is that the same day the top-of-the-fold news centered on JP Morgan’s upcoming $13 billion settlement with the US Department of Justice (DoJ) related to the mortgage market. Interestingly, the news barely budged JP Morgan’s stock, with JPM trading down just 15 cents, or 0.28%, on the day.
We are not here to judge Jamie Dimon and his merry men at JP Morgan’s negotiating skills, nor to opine on the fairness or righteousness of a $100 million or a $13 billion fine. We would note however that virtually every business and ex regulatory person we’ve heard interviewed on the subject thinks that the size of both fines is nothing short of preposterous, with terms such as ‘extortion’ bandied about.
What we can say, however, is that a very important lesson can be learned from what Mr. Dimon is doing — that is, settling with the regulator. Mr. Dimon knows, as do the astute management of many regulated financial firms of all kinds, that the ‘day after’ you still need to live with your regulator. And if you publicly fight your regulator you might very well win the battle, but you likely will also win an enemy who can make your life miserable for a long time to come.
The smart move is (usually) to settle and move on. even when the regulator wants to grab half of your annual net income.
Do you agree with Mr. Dimon? Let us know, leave us your comments below.
To see the CFTC press release regarding the $100 million fine to JP Morgan click here.