1

UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

ADMINISTRATIVE PROCEEDING

File No. 3-15507

In the Matter of

JPMorgan Chase & Co.,

Respondent.

PROPOSED PLAN OF 

DISTRIBUTION

 

I. OVERVIEW

The Division of Enforcement submits this Proposed Plan of Distribution (the 

“Distribution Plan”) to the United States Securities and Exchange Commission (the 

“Commission”) pursuant to Rule 1101 of the Commission’s Rules on Fair Fund and 

Disgorgement Plans (“Rules”), 17 C.F.R. § 201.1101. As described more specifically below, the 

Distribution Plan proposes to utilize civil money penalties paid by JPMorgan Chase & Co. 

(“Respondent” or “JPM”) to compensate investors harmed when JPM failed to disclose 

accurately in public filings made with the Commission the true amount of trading losses it 

suffered in the first quarter of 2012, and the effectiveness of its disclosure controls and 

procedures.

Beneficial owner investors who will be eligible for a distribution must have purchased 

and/or held eligible securities, defined in Paragraph 11.i. below, during the time period 

delineated in the Plan of Allocation described in Paragraphs 38-43 below, and met all other 

requirements of the Distribution Plan.

The Distribution Plan describes the procedures for commenting in Paragraph 75 below. 

The Distribution Plan is subject to approval by the Commission and the Commission retains 

jurisdiction over its implementation.
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II. BACKGROUND

1. On September 19, 2013, the Commission issued an Order Instituting Cease-andDesist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, 

Making Findings, and Imposing a Cease-and-Desist Order (“Order”).

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In the Order, 

the Commission found that the Respondent violated federal securities laws when it 

made material misstatements in its public filings with the Commission. Specifically, 

the Commission found that JPM made misstatements in its public filings regarding: a) 

the true amount of its losses in the first quarter of 2012 from positions held in the 

JPM Chief Investment Office’s (“CIO”) Synthetic Credit Portfolio; and b) the 

effectiveness of its disclosure controls and procedures. Respondent filed a Form 8-K 

on April 13, 2012, containing its earnings release for the first quarter of 2012. A

misstatement concerning Respondent’s trading losses suffered during the first quarter 

of 2012 resulted in reported earnings being overstated. On May 10, 2012, after 

trading had closed, Respondent filed a Form 10-Q for the first quarter and held an 

analyst call. Respondent disclosed it had suffered approximately $2 billion in trading 

losses since the start of the second quarter on the CIO’s Synthetic Credit Portfolio 

positions, and that there could be additional losses. However, the May 10 disclosures 

were not fully effective as corrective disclosure because the 10-Q (a) understated the 

size of the losses as of quarter end and b) failed to disclose that JPM’s disclosure 

controls and procedures were not effective. 

2. The Commission ordered JPM to pay a civil money penalty in the amount of 

$200,000,000. Respondent timely paid the total $200,000,000 ordered by the 

Commission on September 19, 2013. In addition, JPM agreed to pay all reasonable 

administrative costs and expenses of any distribution, including the fees and expenses 

of a tax administrator, within thirty (30) days after receipt of an invoice for such 

services.2

3. The Commission established a Fair Fund in the amount of $200,000,000 on March 5, 

2014 pursuant to Section 308(a) of Sarbanes-Oxley for distribution to injured 

investors.3

4. The Fair Fund has been deposited at the United States Treasury Department’s Bureau 

of the Fiscal Service (“BFS”) for investment. Other than potential interest income 

from the BFS investment, the Commission does not anticipate that the Fair Fund will 

receive additional funds. All BFS fees will be paid from the Fair Fund.

 

1

See Exchange Act Rel. No. 70458 (September 19, 2013).

2

Id.

3

See Order Establishing a Fair Fund, Exchange Act Rel. No. 71654 (March 5, 2014).
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A. Fund Administrator

5. The Commission has appointed RCB Fund Services, LLC as the fund plan

administrator (the “Administrator”).4 

6. The Administrator has obtained a bond in the manner prescribed in Rule 1105(c) in 

the amount of $200,000,000.

7. The Administrator will be entitled to reasonable administrative costs and expenses in 

connection with the administration and distribution of the Fair Fund (including any 

such costs and expenses incurred by agents, consultants or third parties retained, after 

consultation with and approval of the Commission staff, by the Administrator in 

furtherance of its duties). The Administrator will invoice all costs and expenses for 

the administration and distribution of the Fair Fund directly to the Respondent. A 

copy of the invoice will be provided to the Commission staff.

8. The Administrator will be responsible for administering the Fair Fund in accordance 

with the Distribution Plan. This will include, among other things, taking reasonable 

steps to identify and contact Potential Claimants as defined in Paragraph 11.p. below;

obtaining accurate mailing information for Potential Claimants; establishing a website 

and staffing a call center to address inquiries during the claims process; developing a 

claims database; preparing accountings; cooperating with any tax administrator 

appointed by the Commission to satisfy any tax liabilities and to ensure compliance 

with income tax reporting requirements; advising Potential Claimants of deficiency in 

claims and providing an opportunity to cure any documentary defects; taking 

antifraud measures, such as identifying false, ineligible and overstated claims; making 

determinations under the criteria established herein as to Potential Claimant 

eligibility; advising Potential Claimants of final claim determinations; and disbursing 

the Fair Fund in accordance with this Distribution Plan.

B. Tax Administrator

9. The Commission has appointed Damasco & Associates, LLP as the Tax 

Administrator of the Fair Fund (the “Tax Administrator”).

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The Tax Administrator is 

required to administer the Fair Fund as a Qualified Settlement Fund under Section 

468B (g) of the Internal Revenue Code, 26 U.S.C. §468B (g), and related regulations, 

26 C.F.R. §§1.468B-1 through 1.468B-5. The Tax Administrator is responsible for 

 

4

See Exchange Act Rel. No. 71825 (March 27, 2014).

5

See Order Appointing Tax Administrator, Exchange Act Rel. No. 70615 (October 4, 2013).
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all income tax related reporting requirements including the preparation and filing of 

tax returns. The Administrator will cooperate with the Tax Administrator in 

providing any information necessary for income tax compliance.

10. Tax compliance fees and costs will be paid by JPM as part of the cost of the 

administration of the Fair Fund. Any taxes on interest earned by the Fair Fund will

be paid by the Fair Fund.

III. DEFINITIONS

11. As used in this Distribution Plan, the following definitions will apply:

a. “Claim Form” means the form designed by the Administrator for the filing 

of claims in accordance with the terms of this Distribution Plan. The claim 

form will require, at a minimum, sufficient documentation reflecting any 

Potential Claimant’s purchases and dispositions of Eligible Securities during 

the Relevant Period, and the tax identification number of the Potential 

Claimant.

b. “Claims Packet” means the materials relevant to submitting a claim that may 

be provided to Potential Claimants known to the Administrator or to those 

who request such materials through a website or other appropriate delivery 

mechanisms. These materials will include a copy of the Fair Fund Notice and 

Claim Form (together with instructions for completion of the Claim Form).

c. “Days” means calendar days, unless otherwise specified herein.

d. “Determination Notice” means the notice sent by the Administrator to all

Potential Claimants that submitted a Claim Form. The Determination Notice 

will state the Administrator’s determination of the validity (eligible, partially 

or wholly deficient, or ineligible) and amount of the claim of the Potential 

Claimant. The Determination Notice will provide to each Potential Claimant 

whose claim is deficient, in whole or in part, the reason(s) for the deficiency, 

notify the Potential Claimant of the opportunity to cure such deficiency, and 

provide instructions regarding what is required to do so. In the event the 

claim is denied, the Determination Notice will state the reason for such denial 

and notify the Potential Claimant of their opportunity to request 

reconsideration of their claim.

e. “Distribution Payment” means a payment to an Eligible Claimant in 

accordance with the terms of this Distribution Plan.

f. “Distribution Plan” means this Distribution Plan in the form approved by the 

Commission.

g. “Eligible Claimant” means a Potential Claimant who is finally determined by 

the Administrator to be eligible for a Distribution Payment from the Fair Fund
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as a result of transactions in Eligible Securities during the Relevant Period. 

Eligible Claimants do not include:

i. Respondent and any person who served from January 1, 2012 through 

the end of the Relevant Period as an officer or director of JPM6, and 

any assigns, creditors, heirs, distributees, spouses, parents, dependent 

children or controlled entities of any of the foregoing persons or 

entities;

ii. Any defendant in SEC v. Martin-Artajo & Grout, 1:13-cv-05677-GBD 

(SDNY);

iii. Any Person who, as of the claims filing deadline, has been the subject 

of criminal charges related to the violations found in the Order or any 

related Commission action;

iv. The Administrator, its employees, and those persons assisting the 

Administrator in its role as the Administrator; 

v. Any affiliates7, assigns, creditors, heirs, distributees, spouses, parents, 

dependent children or controlled entities of any of the foregoing 

persons or entities described in g.ii.-g.iv. hereof; and/or

vi. Any assignee of another Person’s right to obtain a recovery in the 

Commission’s action against JPM, provided, however, that this 

provision shall not be construed to exclude those Persons who 

obtained such a right by gift, inheritance or devise. 

h. “Eligible Loss Amount” means the amount of loss an Eligible Claimant has 

incurred through the investment in Eligible Securities during the Relevant 

Period, to be calculated in accordance with the Plan of Allocation.

i. “Eligible Securities” refers to shares of JPM common stock listed on a U.S. 

exchange and registered with the Commission. Transactions in JPM common 

stock during the Relevant Period that are pursuant to, or in connection with, a 

swap, an option or other derivative will not be eligible for a recovery.

j. “Fair Fund” means the $200,000,000 fund created by the Commission for the 

benefit of investors harmed by Respondent’s violations discussed in the 

Order, plus any interest accrued from the BFS or escrow investments. 

k. “Fair Fund Notice” means a written notice from the Administrator to 

Potential Claimants informing them of the Fair Fund and its eligibility 

requirements, and explaining how to submit a claim. The notice will both be 

mailed and published pursuant to Paragraphs 14 and 15, below. 

 

6 An “officer” excluded under this paragraph is any officer of JPM (not including any JPM subsidiaries or affiliates) 

required to file a Form 3, 4, or 5 with the Commission pursuant to Section 16 of the Securities Exchange Act of 

1934 to report transactions in Eligible Securities during the 2012 calendar year.

7 As used herein, “Affiliate” shall have the meaning described in Section 101(2) of the United States Bankruptcy 

Code, 11 U.S.C. § 101 et seq.
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l. “Final Determination Notice” means the Administrator’s written reply to 

each Potential Claimant who timely responded to the Determination Notice in 

an effort to cure a deficiency or seek reconsideration of a rejected claim. The 

Final Determination Notice will constitute the Administrator’s final ruling 

regarding the status of the claim.

m. “Net Fair Fund” means the assets of the Fair Fund, less any amounts 

expended by the Fair Fund, plus any investment income.

n. “Person” means natural individuals as well as legal entities such as 

corporations, partnerships, or a limited liability company. 

o. “Plan of Allocation” means the methodology by which a Potential Claimant’s 

Eligible Loss Amount is calculated. The Plan of Allocation is located in 

Paragraphs 38 through 43 below. 

p. “Potential Claimants” means those Persons, or their lawful successors, 

identified by the Administrator as having possible claims to recover from the 

Fair Fund under the Distribution Plan, or Persons asserting that they have 

possible claims to recover from the Fair Fund under the Distribution Plan.

q. “Relevant Period” means the period of time commencing on April 13, 2012 

and continuing through May 20, 2012.

IV. ADMINISTRATION OF THE FAIR FUND

A. Identification of and Notification to Claimants

12. The Administrator will, insofar as practicable, use its best efforts to identify Potential 

Claimants from a review of trading records, account information provided by the 

Respondent, registered broker-dealers and investment advisors, and any other source 

available to them. The Administrator may also engage a third-party firm, after 

consultation with and approval of the Commission staff, to assist in identifying 

Potential Claimants to maximize the participation rate of JPM investors in the Fair 

Fund.

13. The Administrator will design and submit a Claims Packet, including a Fair Fund 

Notice and Claim Form, to the Commission staff for review and approval.

14. Within sixty days (60) after Commission approval of the Distribution Plan, the 

Administrator will send an initial mailing of the Fair Fund Notice to all Potential 

Claimants known to the Administrator. Each Fair Fund Notice will notify the 

Potential Claimant of the Fair Fund, generally describe the Fair Fund’s claim and 

distribution processes, explain how to obtain a copy of the approved Distribution Plan 
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and Claim Form by request or from the Fair Fund website, and identify ways to 

submit a claim.

15. The Administrator will publish a notice of the Fair Fund on the internet and/or in 

print media in a manner deemed appropriate by the Administrator and not 

unacceptable to the Commission staff. The notice publication will include, at a 

minimum, a statement that the Fair Fund relates to investments in Eligible Securities, 

a brief description of eligibility requirements, and instructions for obtaining and 

submitting a Claim Form. The first notice will appear within ten (10) days of the 

initial mailing of the Fair Fund Notice. 

16. The Administrator will establish and maintain a website devoted solely to the Fair 

Fund. The Fair Fund website, located at www.jpmsecfund.com, will make available 

a copy of the approved Distribution Plan, provide information regarding the claims 

process and eligibility requirements for participation in the Fair Fund in the form of 

frequently asked questions, include a copy of a Claim Form and related materials in 

downloadable form, and such other information covering process or substance that 

the Administrator believes will be beneficial to Potential Claimants. The 

Commission staff retains the right to review and approve any material posted on the 

Fair Fund website.

17. Persons also may obtain a copy of the Distribution Plan on the Commission’s public 

website at http://www.sec.gov/litigation/fairfundlist.htm.

18. The Administrator will establish and maintain a toll-free telephone number for 

Potential Claimants to call to speak to a live representative of the Administrator 

during its regular business hours or, outside of such hours, to hear prerecorded 

information about the Fair Fund. The Administrator will advise the Commission staff 

of the toll-free telephone number. The Administrator will also establish and maintain 

a traditional mailing address and an email address which will be listed on all 

correspondence from the Administrator to Potential Claimants as well as on the 

website.

19. The Administrator will promptly provide a Claims Packet to any Potential Claimant 

upon request.

20. The Administrator will mail notices to the Administrator’s list of banks, brokers, and 

other nominees, as well as any other institutions identified during the outreach 

process, that may have records of JPM shareholders and holdings during the Relevant 
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Period. The Administrator will request that these entities, to the extent that they were 

record holders for beneficial owners of the Eligible Securities: 

a. notify the respective beneficial owners within fourteen (14) days of receipt of 

the Administrator’s notice so that beneficial owners may timely file a claim; 

and/or 

b. provide the Administrator a list of last known names and addresses for all 

beneficial owners for whom the record holders purchased Eligible Securities 

during the Relevant Period so that the Administrator can communicate with 

them directly.

21. The Administrator will attempt to locate any Potential Claimant whose mailing is 

returned as “undeliverable” and will document all such efforts. The Administrator 

will utilize all means reasonably available, including LexisNexis, to obtain updated 

addresses in response to undeliverable notices, and forward any returned mail for 

which an updated address is provided or obtained. The Administrator will make 

available, upon request by the Commission staff, a list of all Potential Claimants

whose Fair Fund Notices have been returned as “undeliverable” due to incorrect 

addresses and for which the Administrator has been unable to locate current 

addresses. 

B. Claims Process

22. In all materials that refer to the claim filing deadline, the claim filing deadline will be 

clearly identified as the calendar date one hundred twenty (120) days from the date of 

the first publication of the Fair Fund Notice, as described in Paragraph 15 above. To 

avoid being barred from asserting a claim, each Potential Claimant must submit to the 

Administrator a Claim Form reflecting such Potential Claimant’s claim postmarked 

on or before the deadline. The burden will be upon the Potential Claimant to ensure 

that his or her Claim Form has been properly and timely postmarked. A claim that is 

postmarked after the final deadline will not be accepted unless the deadline is 

extended by the Administrator after consultation with the Commission staff. Any 

extension will be published on the Fair Fund website.

23. The burden to prove receipt of the claim by the Administrator will be upon the 

Potential Claimant; therefore Potential Claimants will be instructed to submit their 

claims in a manner that will enable them to prove receipt of the claim by the 

Administrator.

24. Claim Forms must be properly filled out per the instructions provided by the 

Administrator, and must be accompanied by such documentary evidence as the 
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Administrator deems necessary or appropriate to substantiate the claim. Without 

limitation, this information may include third party documentary evidence of 

purchases and dispositions of Eligible Securities during the Relevant Period, as well 

as holdings of Eligible Securities at pertinent dates. 

25. All claims and supporting representations necessary to determine a Potential

Claimant’s eligibility to receive a distribution from the Fair Fund under the terms of 

the Distribution Plan must be verified by a declaration executed by the Potential

Claimant under penalty of perjury under the laws of the United States. The 

declaration must be executed by the Potential Claimant, unless the Administrator 

accepts such declaration from a Person authorized to act on the Potential Claimant’s 

behalf, whose authority is supported by such documentary evidence as the 

Administrator deems necessary.

26. The Administrator will review all claim submissions and determine the eligibility of 

each Potential Claimant to participate in the Fair Fund by reviewing claim data and 

supporting documentation (or the lack thereof), verifying the claim, and calculating 

each Potential Claimant’s loss pursuant to the Plan of Allocation. Each Potential

Claimant will have the burden of proof to establish the validity and amount of his or 

her claim, and that they qualify as an Eligible Claimant. The Administrator will have 

the right to request, and the Potential Claimant will have the burden of providing to 

the Administrator, any additional information and/or documentation deemed relevant 

by the Administrator. Any additional information supplied to the Administrator must 

be postmarked no later than the deadline set for responses to a Determination Notice.

27. Potential Claimants will be able to contact the Administrator via the toll-free 

telephone number, an email address for the Administrator, or using traditional mail to 

request copies of the Claim Form, ask questions about how to complete and file the 

Claim Form, and inquire about their claim. 

28. The Administrator will provide a Determination Notice to each Potential Claimant 

who has filed a Claim Form with the Administrator, setting forth the Administrator's 

conclusions concerning such claim. 

29. The Determination Notice will provide to each Potential Claimant whose claim is 

deemed deficient, in whole or in part, the reason(s) for the deficiency (e.g., failure to 

provide required information or documentation). It will also notify the Potential 

Claimant of the opportunity to cure such deficiency, and provide instructions 

regarding what is required to do so. Any Potential Claimant with a deficient claim 
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will have thirty (30) days from the date of the Determination Notice to cure any 

deficiencies identified in the Determination Notice.

30. In the event the claim is denied, the Determination Notice will state the reason for 

such denial. Any Potential Claimant seeking reconsideration of a rejected claim must 

advise the Administrator in writing within thirty (30) days of the date of the 

Determination Notice. All requests for reconsideration must include the necessary 

documentation to substantiate the basis upon which the Potential Claimant is 

requesting reconsideration of their claim.

31. The Administrator will send, as appropriate, a Final Determination Notice to all 

Potential Claimants who responded to the Determination Notice in an effort to cure a 

deficiency or to seek reconsideration of a rejected claim. The Administrator will 

consult with Commission staff regarding claim rejections before the issuance of Final 

Determination Notices. The Administrator will send such Final Determination 

Notices by no later than sixty (60) days following receipt of documentation or 

information in response to the Determination Notice, or such longer time as the 

Administrator determines is necessary for a proper determination concerning the 

claim. 

32. The Administrator may, in its sole discretion, consider disputes of any nature 

presented by Potential Claimants, and will consult Commission staff as appropriate. 

The Final Determination Notice will constitute the Administrator’s final ruling 

regarding the status of the claim.

33. The Administrator will have the authority, in its sole discretion, to waive technical 

claim deficiencies and approve claims on a case by case basis, or in groups of claims.

All determinations made by the Administrator in accordance with the Distribution 

Plan in any dispute, request for reconsideration, or request to cure a deficient claim 

will be final and not subject to appeal.

34. The Potential Claimant has the burden of notifying the Administrator of a change in 

his or her current address and other contact information, and of ensuring that such 

information is properly reflected on the Administrator's records.

35. The receipt of Eligible Securities by gifts, inheritance, devise, or operation of law will

not be deemed to be a purchase of Eligible Securities, nor will it be deemed an 

assignment of any claim relating to the purchase of such securities unless specifically 

so provided in the instrument of inheritance. However, the recipient of Eligible 

Securities as a gift, inheritance, devise or by operation of law will be eligible to file a 
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Claim Form and participate in the distribution of the Fair Fund to the extent the 

original purchaser would have been eligible under the terms of the Distribution Plan. 

Only one claim may be submitted with regard to the same transactions in Eligible 

Securities, and in cases where multiple claims are filed by the donor and donee, the 

donee claim will be honored, assuming it is supported by proper documentation.

36. To the extent that an Eligible Claimant, his or her representative, heir, or assign 

requests a distribution check to be issued or reissued in a different name than the 

Eligible Claimant (e.g., as the result of a name change because of marriage or 

divorce, or as the result of death), the Administrator will honor such request upon 

receipt of a written request and supporting documentation, which the Administrator in 

its sole discretion deems appropriate to substantiate the request.

37. Claims on behalf of a retirement plan covered by Section 3(3) of ERISA, 29 U.S.C. 

§ 1002(3), which do not include Individual Retirement Accounts, and such plan’s 

participants, are properly made by the administrator, custodian or fiduciary of the 

plan and not by the plan’s participants. The Administrator will distribute any 

payments on such claims directly to the administrator, custodian or fiduciary of the 

retirement plan. The custodian or fiduciary of the retirement plan will distribute any 

payments received in a manner consistent with its fiduciary duties and the governing 

account or plan provisions.

C. Plan of Allocation

38. For purposes of this Distribution Plan, the methodology to be applied in calculating 

Eligible Loss Amounts was derived from an event study which analyzed the effect of 

misstatements by the Respondents on market prices of Eligible Securities. The 

Eligible Loss Amount is calculated to reflect the artificially inflated portion of the 

per-share price of the Eligible Security that resulted from the misstatements about a) 

the true amount of JPM’s losses in the first quarter of 2012 from positions held in the 

CIO’s “Synthetic Credit Portfolio”; and b) the effectiveness of JPM’s disclosure 

controls and procedures in connection with financial reporting.

39. JPM’s statements during the first three quarters of 2012 regarding JPM’s trading 

losses and JPM’s disclosure controls and procedures around financial reporting were 

all considered in determining the Relevant Period. As stated above, the Relevant 

Period for this Distribution Plan is April 13, 2012 through May 20, 2012. The filing 

of the Form 8-K by Respondent on April 13, 2012 was the first time investors relied 

on inaccurate information in making investment decisions, and therefore this date

marks the beginning of the Relevant Period. There were no partially corrective 
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disclosures between April 13, 2012 and May 10, 2012. The filing of the Form 10-Q 

on May 10, 2012 (after trading had closed), served as a partially corrective disclosure 

as it addressed the existence of the approximately $2 billion in trading losses suffered 

since the start of the second quarter on the CIO positions, and that there could be 

additional losses. However, the May 10 disclosure understated the size of the trading 

losses as of quarter end and affirmatively misstated that JPM’s disclosure controls 

and procedures were effective. By May 21, 2012, the market had become aware that 

the trading losses were significantly greater than what JPM had reported and that the 

disclosure control issues were being addressed, as a result of the announcement that 

Respondent was suspending its share buyback program and the reporting by various 

media outlets of the extent of the losses. Thus, May 20, 2012 marks the end of the 

Relevant Period.

40. The inflation per share amount is a measure of the inflation in the price of the shares 

of the Eligible Security on the date of the transaction that is attributable to the 

misstatements made by JPM. After adjusting for economy-wide and industry-wide 

effects on share price movements, the inflation per share amounts were determined by 

isolating the abnormal price movements of the Eligible Security as a result of the 

three aforementioned disclosures. Below is a graphical depiction of the inflation per 

share measurement that will be used to calculate Eligible Loss Amounts.

41. The calculation of Eligible Loss Amounts will be determined based on the timing of 

each Potential Claimant’s transactions in Eligible Securities, as follows:
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a. For Eligible Claimants who purchased Eligible Securities between April 13, 

2012 and May 10, 2012, inclusive, and held the shares of Eligible Securities 

through May 20, 2012, the calculation of loss will be the number of shares of 

Eligible Securities purchased during this period multiplied by $4.84 per share;

b. For Eligible Claimants who purchased Eligible Securities between April 13, 

2012 and May 10, 2012, inclusive, and sold their shares of Eligible Securities 

between May 11, 2012 and May 20, 2012, inclusive, the calculation of loss 

will be the number of shares of Eligible Securities purchased during this 

period multiplied by $3.53 per share; and

c. For Eligible Claimants who purchased Eligible Securities between May 11, 

2012 and May 20, 2012, inclusive, and held the shares of Eligible Securities 

through May 20, 2012, the calculation of loss will be the number of shares of 

Eligible Securities purchased during this period multiplied by $1.31 per share. 

42. Any transaction that does not fall within the parameters described in Paragraph 41

above will be ineligible for a distribution from the Fair Fund, including but not 

limited to Potential Claimants who purchased and sold Eligible Securities between 

April 13, 2012 and May 10, 2012. Any Eligible Claimant may have transactions that 

fall within one or more of these categories, and in this case, his/her Eligible Loss 

Amount will be calculated consistent with the foregoing, taking into account all 

transactions in Eligible Securities during the Relevant Period. Transactions in 

Eligible Securities during the Relevant Period that are pursuant to, or in connection 

with, a swap, option or other derivative will not be eligible for a recovery.

43. A claimant’s Eligible Loss Amount will be determined using the first-in, first-out 

(“FIFO”) method, aggregating the gains and losses for all transactions that occurred 

during the Relevant Period. To determine Eligible Loss Amounts in accordance with 

the FIFO method, shares of Eligible Securities sold during the Relevant Period will be 

matched, in chronological order, first against shares of Eligible Securities held at the 

beginning of the Relevant Period. Any remaining sales of shares of Eligible Securities 

during the Relevant Period will be matched, in chronological order, against shares of 

Eligible Securities purchased during the Relevant Period. Accordingly, the inflationrelated proceeds realized from a sale of Eligible Securities during the Relevant Period 

that were originally purchased prior to the commencement of the Relevant Period will 

offset any inflation-related losses suffered as a result of any purchases of Eligible 

Securities made during the Relevant Period. The date of any transaction for purposes 

of the loss methodology is the “trade” date as distinguished from the “settlement” 

date. Included below are a few basic examples to illustrate the loss calculation 

methodology and the FIFO application:
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Example 1

Transaction Date Transaction Type Number of Shares

Inflation Per Share 

Amount

4/12/2012 Beginning Holding 0 $0.00

4/25/2012 Purchase 100 $4.84

5/12/2012 Purchase 100 $1.31

5/15/2012 Sale 100 -$1.31

FIFO Calculation

Shares Purchase Date Sale Date Eligible Loss Amount

100 4/25/2012 5/15/2012 $353.00

100 5/12/2012 Held Through 5/20/2012 $131.00

Total Potential Eligible Loss Amount $484.00

Example 2

Transaction Date Transaction Type Number of Shares

Inflation Per Share 

Amount

4/12/2012 Beginning Holding 500 $0.00

4/20/2012 Purchase 100 $4.84

5/1/2012 Sale 100 -$4.84

5/16/2012 Sale 100 -$1.31

5/19/2012 Sale 100 -$1.31

FIFO Calculation

Shares Purchase Date Sale Date Eligible Loss Amount

100 Beginning Holding 5/1/2012 -$484.00

100 Beginning Holding 5/16/2012 -$131.00

100 Beginning Holding 5/19/2012 -$131.00

100 4/20/2012 Held Through 5/20/2012 $484.00

Total Potential Eligible Loss Amount $0.00
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D. Establishment of the Escrow Account

44. The Administrator will establish an escrow account (the “Escrow Account”) and a 

distribution account (“Distribution Account”) at a well-capitalized8 U.S. commercial 

bank (the “Bank”), to be proposed by the Administrator and not unacceptable to the 

staff of the Commission. The Escrow Account will be established pursuant to an 

escrow agreement not unacceptable to the Commission staff. The name of the 

Escrow Account will be in the following form: Name of Escrow Account, TIN, as 

custodian for the benefit of distributees of the Fair Fund.

45. During the term of the escrow agreement, any investment of the funds will be with a 

view toward: first, conserving and preserving the principal; and second, maximizing 

investment return. The Administrator may invest and reinvest the assets of the 

Escrow Account only in direct obligations of the United States of America, including 

United States Treasury securities backed by the full faith and credit of the United 

States Government. This may also include a AAA-rated United States Treasury 

money market fund that directly invests 100% in short term United States Treasury 

securities and obligations, provided however, that the money market mutual funds’ 

investments in short term United States Treasury securities will not be made through 

repurchase agreements or other derivative products.

46. The assets of the Fair Fund are subject to the continuing jurisdiction and control of 

the Commission. Prior to the receipt of any funds in the Escrow Account, the Bank 

 

8 A well-capitalized bank is a bank that meets the Federal Reserve Board’s definition of “well capitalized” as 

defined by the Federal Reserve Act Subpart D, 12 C.F.R. § 208.43(b)(1).

Example 3

Transaction Date Transaction Type Number of Shares

Inflation Per Share 

Amount

4/12/2012 Beginning Holding 500 $0.00

4/15/2012 Sale 500 -$4.84

4/16/2012 Purchase 500 $4.84

5/21/2012 Holding Held 500 $0.00

FIFO Calculation

Shares Purchase Date Sale Date Eligible Loss Amount

500 Beginning Holding 4/15/2012 -$2,420.00

500 4/16/2012 Held Through 5/20/2012 $2,420.00

Total Potential Eligible Loss Amount $0.00
16

will provide the Administrator an attestation, in a form not unacceptable to the 

Commission staff, that all funds in the Escrow Account will be held for the Fair Fund 

and that the Bank will not place any lien or encumbrance of any kind upon the funds.

The Administrator will be the signatory on the Escrow Account, subject to the 

continuing jurisdiction and control of the Commission. 

47. All interest earned will accrue for the benefit of the Fair Fund, and all costs associated 

with the Escrow and Distribution Accounts will be paid by the Respondent.

48. Upon transfer from the BFS, the assets of the Fair Fund will be held in the Escrow

Account, separate from Bank assets, until the presentation of checks. All Fair Fund 

checks presented for payment or electronic transfers will be subject to “positive pay”

controls before they are honored by the Bank. The “positive pay” system provides 

protection against fraud arising from counterfeit or altered checks. The “positive pay”

system will require, at a minimum, confirmation by the Bank that all checks 

presented for payment match the identifiers and amounts on the payee list prior to 

honoring such checks. In each instance, funds will be transferred from the Escrow

Account to the Distribution Account on the Bank’s confirmation that a presented 

check matches the relevant “positive pay” criteria.

49. The Administrator will authorize the Bank to provide the Escrow Account 

information to the Tax Administrator, including duplicate statements for the Escrow

Account, to prepare federal and state tax returns.

E. Distribution of the Fair Fund

50. The Net Fair Fund will be distributed to Eligible Claimants as provided under the 

terms of this Distribution Plan. An Eligible Claimant’s Eligible Loss Amount, as 

determined in accordance with the methodology detailed in the Plan of Allocation in 

Paragraphs 38-43 above, will be used to determine the amount of their Distribution 

Payment.

51. The Administrator will distribute the Net Fair Fund to all Eligible Claimants only 

after all Claim Forms have been processed and all Potential Claimants whose claims 

have been rejected or disallowed, in whole or in part, have been notified and provided 

the opportunity to contest or cure pursuant to the procedures set forth herein, and after 

a Commission Order to Disburse has been issued.

52. Should the total amount of the Eligible Loss Amounts of all Eligible Claimants

exceed the Net Fair Fund, the Administrator will distribute the funds to the Eligible 
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Claimants pro rata based upon the ratio of the Eligible Loss Amount of each Eligible 

Claimant to the aggregate Eligible Loss Amounts of all Eligible Claimants. No 

Distribution Payment will be made to an otherwise Eligible Claimant unless the 

amount to be paid equals or exceeds $10.00. 

53. The Administrator may, pursuant to a Commission Order, make one or more redistributions to Eligible Claimants.

9

54. In order to disburse the Fair Fund, the Administrator will compile and submit a list of 

Eligible Claimants (including names, addresses, and Claim IDs) and Eligible Loss 

Amounts to the Commission staff after mailing the Final Determination Notices to 

Potential Claimants.

55. The Administrator will also provide a reasonable assurances letter to the Commission 

staff, representing that the list of Eligible Claimants: a) was compiled in accordance 

with the approved Distribution Plan; b) is accurate as to Eligible Claimants’ names, 

addresses, and Eligible Loss Amounts; and c) provides all information necessary to 

make payments to each Eligible Claimant.

56. Upon receipt and review of the Eligible Claimant list, the Commission staff will 

obtain authorization from the Commission to disburse pursuant to Rule 1101(b)(6). 

Upon approval by the Commission, the Commission staff will cause the transfer of 

funds to the Escrow Account. The Administrator will then use its best efforts to 

commence mailing Distribution Payment checks or effect wire transfers within ten 

(10) business days of the release of the funds into the Escrow Account. All efforts 

will be coordinated to limit the time between the Escrow Account’s receipt of the 

funds and the issuance of Distribution Payments.

57. All checks will be issued by the Administrator from the Distribution Account set up 

at the Bank. All checks will bear a stale date of one hundred twenty (120) days from 

the date of issuance. Checks that are not negotiated by the stale date will be voided, 

and the Bank will be instructed to stop payment on those checks, except as provided 

in Paragraphs 63 to 65 below.

 

9

 In the event of a re-distribution, such re-distribution will be limited to those Eligible Claimants that negotiated 

their initial distribution checks, or received electronic payments, and who would receive at least $20.00 in the redistribution.
18

58. All payments will be preceded or accompanied by a communication that includes, as 

appropriate: 

a. A statement characterizing the distribution; 

b. A statement that the tax treatment of the distribution is the responsibility of 

each Eligible Claimant and that the Eligible Claimant should consult his or her 

tax advisor for advice regarding the tax treatment of the distribution;

c. A statement that checks will be void and cannot be reissued after one hundred 

twenty (120) days from the date the original check was issued; 

d. A statement that reissued checks will expire on the later of one hundred 

twenty (120) days from the date of the original check or sixty (60) days from 

the date of the reissued check (the “Limit Date”); and

e. Contact information for the Administrator for questions regarding the 

Distribution Payment. 

59. A Distribution Payment, either on the face of the check or in the accompanying letter, 

will clearly indicate that the money is being disbursed from the Fair Fund established 

by the Commission for the benefit of the injured investors of the Respondent. The 

letter and other mailings to Eligible Claimants characterizing a Distribution Payment

will be submitted to the Commission staff for review and approval. 

60. Electronic or wire transfers may be utilized at the discretion of the Administrator to 

transfer approved Distribution Payments to filers of claims on behalf of twenty (20) 

or more Eligible Claimants. Wire transfers will be initiated by the Administrator 

using a two-party check and balance system, whereby completion of a wire transfer 

will require an authorization by two members of the Administrator’s senior staff.

F. Post Distribution; Handling of Returned or Un-Cashed Checks

61. The Administrator will research and attempt to reconcile all returned items due to 

non-delivery, insufficient addresses, or any other deficiencies. 

62. The Administrator will reissue checks to Eligible Claimants upon the receipt of a 

valid, written request from the Eligible Claimant. Such reissued checks will be void 

if not negotiated by the Limit Date. 

63. In cases where an Eligible Claimant is unable to endorse a Distribution Payment

check as written (e.g., name changes, IRA custodian changes, or recipient is 

deceased) and the Eligible Claimant or a lawful representative requests the reissuance 

of a Distribution Payment check in a different name, the Administrator will request, 

and must receive, documentation to support the requested change. If such change 
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request is properly documented in the sole discretion of the Administrator, the 

Administrator will issue an appropriately redrawn Distribution Payment check.

64. If any Distribution Payment check is returned as “undeliverable,” the Administrator 

will use all reasonable commercially available resources to locate the most up-to-date 

address after receipt of such check. The Administrator will mail a reissued check to 

the updated address obtained through the database search, subject to the Limit Date.

65. The Administrator will make reasonable efforts to contact Eligible Claimants who 

have failed to negotiate any Distribution Payment checks over $500.00 (other than 

those returned as “undeliverable”) and take appropriate action to follow up on the 

status of uncashed checks at the request of Commission staff. If appropriate in the 

sole discretion of the Administrator, the Administrator will have the authority to 

reissue such checks subject to the Limit Date.

66. A residual within the Fair Fund will be established for any amounts remaining after 

all assets have been disbursed. The residual may include, among other things, funds 

reserved for future taxes and for post distribution contingencies, amounts from 

Distribution Payment checks that have not been cashed, amounts from Distribution 

Payment checks that were not delivered or accepted upon delivery, and tax refunds. 

Any funds remaining in the residual after the Commission approves the final 

accounting will be sent to the Commission for transfer to the United States Treasury.

67. The Administrator will retain all claims materials in paper and electronic form for a 

period of six (6) years from the transfer of any remaining funds from the Fair Fund 

Escrow Account to the Commission or the U.S. Treasury. The Administrator will 

destroy all documents, including documents in any media, upon expiration of this 

period. In addition, the Administrator will shut down the website, P.O. Box and 

customer service telephone line(s) established specifically for the administration of 

the Fair Fund two (2) months after the transfer of any remaining funds to the 

Commission or to the United States Treasury, or at such earlier time as the 

Administrator determines with concurrence of the Commission staff.

G. Accountings

68. Pursuant to Rule 1105(f), once the Fair Fund has been transferred from the BFS to the 

Bank, the Administrator will file an accounting with the Commission during the first 

ten (10) days of each calendar quarter on a standardized accounting form provided by 

the Commission staff. The Administrator will file an accounting of all monies earned 

or received and all monies spent in connection with the administration of the 
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Distribution Plan. The accounting will also report all monies billed to JPM in 

connection with the administration of the Distribution Plan during the prior quarter. 

Upon final distributions to Eligible Claimants pursuant to the procedures described 

above, and the payment of all taxes, the Administrator will submit a final accounting 

for approval by the Commission on a standardized form provided by the Commission 

staff prior to the discharge of the Administrator and cancellation of the Administrator 

bond.

H. Termination of the Fair Fund

69. The Fair Fund will be eligible for termination and the Administrator will be eligible 

for discharge after all of the following have occurred: 

a. a final accounting, in a standard accounting format provided by the 

Commission staff, has been submitted by the Administrator and approved by 

the Commission;

b. all taxes and other post distribution expenses have been paid; and 

c. any amount remaining in the Fair Fund has been returned to the Commission

for transfer to United States Treasury. 

70. The Commission staff will seek an order from the Commission to approve the 

termination of the Fair Fund, the discharge of the Administrator, the cancellation of 

the bond, and the transfer of any amount remaining in the Fair Fund to the United 

States Treasury.

71. Once the Fair Fund has been terminated and funds, if any, are transferred to the 

United States Treasury, no further claims will be allowed and no additional payments 

will be made whatsoever.

72. When administering this Distribution Plan, the Administrator, and/or each of their 

designees, agents and assigns, may rely on: all applicable law; orders issued by the 

Commission, including orders issued by delegated authority; orders issued by an 

administrative law judge, if any, appointed in this proceeding; and any records, 

including records containing investor information, provided by Commission staff.

I. Amendments

73. The Administrator will take reasonable and appropriate steps to disburse the Fair 

Fund pursuant to the Commission approved Distribution Plan. The Administrator 

will inform the Commission staff of any changes needed in the approved Distribution 

Plan. Upon agreement with the Commission staff, the Administrator may implement 
21

immaterial changes to the approved Distribution Plan to effectuate its general 

purposes. For example, in consultation with the Commission staff, the Administrator 

may extend any of the procedural deadlines set forth in the approved Distribution 

Plan.

74. If a change is deemed to be material by the Commission staff, Commission approval 

of the change is required prior to the implementation of the change by amending the 

approved Distribution Plan. The Distribution Plan may be amended upon motion by 

any party, the Administrator, or upon the Commission’s own motion.

V. NOTICE AND COMMENT PERIOD

75. The Notice of the Proposed Plan of Distribution and Opportunity for Comment 

(“Notice”) will be published in the SEC Docket and on the Commission’s website at 

http://www.sec.gov/litigation/fairfundlist.htm. Any person wishing to comment on 

the Distribution Plan must do so in writing by submitting their comments to the 

Commission within thirty (30) days of the date of the Notice: (a) to the Office of the 

Secretary, United States Securities and Exchange Commission, 100 F. Street, NE, 

Washington, DC 20549-1090; (b) by using the Commission’s Internet comment form

(http://www.sec.gov/litigation/admin.shtml); or (c) by sending an email to rulecomments@sec.gov. Comments submitted by email or via the Commission’s website 

should include “Administrative Proceeding File Number 3-15507” in the subject line. 

Comments received will be publicly available. Persons should only submit comments 

that they wish to make publicly available.