JP Morgan Faces Another Headache with Insider Trading Probe

JP Morgan may face another hit to its reputation after Japan's Securities and Exchange Surveillance Commission (SESC) launched a probe into whether an employee at the investment bank leaked insider information in conjunction with an IPO the bank was underwriting in Tokyo, according to several media reports.

According to unnamed sources cited by, among others, Reuters, JP Morgan, one of the lead underwriters for the Nippon Sheet Glass IPO that launched in Tokyo, is under investigation by the Japanese watchdog, after the SESC confirmed that Asuka Asset Management was told about the non-public information from one of the lead underwriters.

The SESC issued a recommendation late yesterday that the Financial Services Agency "impose an administrative monetary penalty against Asuka Asset Management on charges of insider trading committed prior to the public announcement of Nippon Sheet Glass Co., Ltd.'s equity offering in August 24, 2010."

A spokersperson from the SESC was not immediately available for comment when contacted this morning by the IBTimes UK.

JP Morgan said in a statement to the IBTimes UK that "the announcement indicated that the SESC concluded that the non-public information was provided by an employee of one of the lead underwriters. To date in connection with this matter JPMorgan Securities Japan Co., Ltd. has not received any indication from the authorities that suggests J.P. Morgan's involvement either by the company as a whole, or by any department as a whole."

"We take this matter extremely seriously and will continue to take measures to enhance our internal control. We are cooperating fully with the authorities on this matter," added JP Morgan.

Japan's second-largest brokerage, Daiwa Securities Group was the second joint underwriter on the IPO in question. In a press statement, a spokeperson at the brokerage said that Daiwa wasn't involved in the insider-trading activity,

Another headache

The investigation follows hot off the heels of one of the largest legal losses for a bank in recent history.

JP Morgan confirmed that the bank has lost billions of dollars, after an employee at its Chief Investment Office made a series of enormous bets that lost money.

Bruno Iksil, who reportedly deals in huge volumes, has earned himself the nickname "the London whale" - which echoes gambling terminology that refers to a "whale" being a leviathan gambler who frequently bets monumental amounts of money.

JP Morgan confirmed they could face a loss of $2bn, after a failed hedging strategy made by Iksil was uncovered.

Meanwhile, the bank's CEO, Jamie Dimon, tried to quell investor concerns at the Deutsche Bank Securities Global Financial Services Investor Conference in New York last week by saying that the group will earn about an $8bn profit this year, despite admitting the losses.

Dimon also would not elaborate on holdings that caused the losses beyond the $2bn already disclosed, though he did say that the Chief Investment Office has $7bn in unrealised gains that may be used to offset the damage.

Shares in JP Morgan closed nearly flat at the end of yesterday's trading session at $33.63. However, according to pre-market open calls, the stock is looking to start trading slightly lower at $33.60