JPMorgan Chase & Co. (NYSE: JPM) today reported that it will restate its
previously-filed interim financial statements for the first quarter of
2012. The restatement will have no effect on total earnings or revenues
for the company year-to-date.
The restatement announced today will reduce the firm’s
previously-reported net income for the 2012 first quarter by $459
million. The restatement relates to valuations of certain positions in
the synthetic credit portfolio in the firm’s Chief Investment Office
(CIO).
More specifically, traders in CIO were expected to mark their positions
where they would expect to be able to execute in the market. In this
instance, while the positions were within thresholds established by an
independent valuation control group within CIO, the firm has recently
discovered information that raises questions about the integrity of the
trader marks and suggests that certain individuals may have been seeking
to avoid showing the full amount of the losses in the portfolio during
the first quarter.
As a result, we are no longer confident that the trader marks reflected
good faith estimates of fair value at quarter end and we decided to
remark the positions utilizing external “mid-market” benchmarks,
adjusted for liquidity considerations. While there are a range of
acceptable values for such positions, we believe our approach represents
an objective valuation and is a reasonable approach under the
circumstances.
Management reached the determination to restate on July 12, 2012, and
reviewed the matter with the Audit Committee of the Firm’s Board of
Directors on the same day.
Our previously filed financial statements for the 2012 first quarter
should no longer be relied upon. We expect to file restated financial
statements for the first quarter as soon as practical but no later than
when we file our financial statements for the second quarter.
In addition, we have determined that there was a material weakness in
our internal control over financial reporting at March 31, 2012 related
to CIO’s internal controls over valuation of the synthetic credit
portfolio. The control deficiencies were substantially remediated by
June 30, 2012.
Our internal review of these matters is ongoing. If we obtain additional
information material to our periodic financial reports, we will make
appropriate disclosure.
More detail related to the restatement is available in a Form 8-K that
the firm is filing this morning with the U.S. Securities and Exchange
Commission.
About J.P. Morgan Chase
JPMorgan Chase & Co. (NYSE: JPM) is a leading global financial services
firm with assets of $2.3 trillion and operations worldwide. The firm is
a leader in investment banking, financial services for consumers and
small businesses, commercial banking, financial transaction processing,
asset management and private equity. A component of the Dow Jones
Industrial Average, JPMorgan Chase & Co. serves millions of consumers in
the United States and many of the world’s most prominent corporate,
institutional and government clients under its J.P. Morgan and Chase
brands. Information about JPMorgan Chase & Co. is available at www.jpmorganchase.com.
