(WASHINGTON) -- J.P. Morgan has agreed to pay $153.6 million to settle charges that it misled investors in Collateralized Debt Obligations (CDOs) tied to the housing market.
The Securities and Exchange Commission alleged that J.P. Morgan did not tell investors that hedge fund Magnetar helped select assets in the CDO portfolio and was betting that those assets would lose value. As a result, the hedge fund was poised to benefit if the CDO assets it was selecting for the portfolio defaulted.
J.P. Morgan did not admit or deny the allegations but agreed to a final judgment. As part of the agreement, J.P. Morgan agreed to improve the way it reviews and approves mortgage securities transactions.
The affected investors included:
- Thrivent Financial for Lutherans, a faith-based non-profit membership organization in Minneapolis.
- Security Benefit Corporation, a Topeka, Kan.-based company that provides insurance and retirement products.
- General Motors Asset Management, a New York-based asset manager for General Motors pension plans.
- Financial institutions in East Asia including Tokyo Star Bank, Far Glory Life Insurance Company Ltd., Taiwan Life Insurance Company Ltd., and East Asia Asset Management Ltd.
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