Today JP Morgan Securities reached a settlement with 25 state attorneys general and five federal regulators regarding their practice of using “sham bids” in the municipal market. The global bank will pay $211 million to settle federal and state charges, according to Reuters.
The details of the settlement are a little mind-numbing if you don’t follow muniland, but they mirror charges of “sham bids” in the auction-rate securities market that JP Morgan first settled in 2006. After violating that SEC’s “cease and desist” order, the bank had to settle for the second time with the North American Securities Administrators Association (NASAA), the Illinois Securities Department, the Florida Office of Financial Regulation and the New York Office of the Attorney Genera in 2008.
This is from a letter written by then-New York Attorney General Andrew Cuomo and sent to Stephen Cutler, General Counsel of JP Morgan, describing the “sham bids” that JP Morgan used to prop up the auction-rate securities market:
…from August of 2007 up until widespread auctions failures, which occurred in the early part of 2008, the auction rate securities market only continued as a result of broker-dealers placing support bids