JPMorgan's CEO sued over $2bn trading loss

America's largest bank just can't shake the attention from the international business community: their shareholders are suing.

by Michael Northcott
Last Updated: 19 Aug 2013

A bad week for Jamie Dimon just got worse: JPMorgan’s CEO is being sued personally, alongside a separate suit against the bank itself, because of the massive $2bn (£1.26bn) trading loss that was made under his watch. 

The first suit, which is being mounted by an individual investor, is seeking damages on behalf of the company against Dimon, the board and a few other management characters. In the second case, a trust in Arizona has filed a securities fraud lawsuit seeking damages on behalf of all investors who bought shares in the bank between April 13, and May 10 this year. 

In terms of PR, the last few weeks have been a catastrophe for JPMorgan. Attention turned to the bank when it was uncovered that its investment-banking arm had made a loss of $2bn, which has inevitably made a lot of shareholders very angry. Then came the launch of the FBI’s criminal investigation into the losses – Dimon and his pals will no doubt be starting to feel the heat with the Feds involved…

An unexpected silver lining came for Dimon yesterday however: shareholders backed him 91% at the firm’s annual shareholders meeting, voting against a proposal to split the role of chairman and CEO. In an attempt to repay shareholders for their support, Dimon promised to pursue disciplinary action against the executives responsible for the losses, and did not rule out the possibility of forcing some to pay ‘clawbacks’ for their poor performance. 

The JPMorgan saga has done the banking global banking community no favours given the hostility from the general public towards high executive pay and large bonuses. The episode is ironic and embarrassing for JPMorgan more generally, as the firm has made such a big song and dance about the quality of its risk management practices. 

No doubt the involvement of the FBI will encourage bosses to try and draw a line under the affair, and stop the damage spreading beyond the trading floor…

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