JPMorgan Securities to Settle Fraud Charges

Jun 22, 2011
Originally published on June 22, 2011 6:33 am
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RENEE MONTAGNE, Host:

NPR's Jim Zarroli reports.

JIM ZARROLI: The Securities and Exchange Commission said J.P. Morgan Securities sold a complex mortgage backed security to a group of institutional investors in 2007. But it allegedly failed to tell the investors that the mortgages underlying the security had been selected by a hedge fund called Magnetar, and Magnetar had shorted some of those mortgages, which means it bet they would fail, says SEC Enforcement director Robert Khuzami.

ROBERT KHUZAMI: In truth, Magnetar capital played a substantial role in the selection of those mortgage assets and stood to profit from the failure of the assets in the CDO portfolio.

ZARROLI: Jim Zarroli, NPR News, New York. Transcript provided by NPR, Copyright NPR.