JP Morgan Chase Facing SEC Probe

by Glen Shapiro, LawAndTax-News.com, New York

03 January 2005

Investment bank, JP Morgan Chase & Co is facing an SEC probe over its involvement in the allegedly improper share trading activities of the Canary Capital Partners hedge fund, the Wall Street Journal reported last week.

The bank was first named in connection with the scandal in lawsuits brought by mutual fund shareholders angered by the fact that Canary was granted permission to trade improperly at their expense. Although a settlement was reached, the mutual fund firms implicated by the lawsuits refused to admit or deny that they had allowed the improper trading activity.

Speaking to the WSJ in connection with the recently announced SEC probe, a spokeswoman for JP Morgan Chase announced that:

"At the time that we were doing business, JP Morgan didn't know and had no reason to believe that Canary, its related entities or Eddie Stern were engaged in any illegal activity."

However, according to the business daily, the SEC investigation is likely to conclude that the investment bank should have spotted the 'red flags' which signalled that Canary was engaging in improper trading activity, at least partly financed by the credit extended to it by the bank.

Several other Wall Street firms, including Credit Suisse First Boston, Bear Stearns, and the Canadian Imperial Bank of Commerce have also received additional regulatory attention as a result of their role in financing Canary's activities.

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