Securities Litigation & Consulting Group (‘SLCG’), a firm that works with plaintiffs in securities litigation, criticized JPMorgan Chase for inflating the value of complex bonds it sold to individual investors.  The consultants based their findings on a study they purportedly conducted that analyzed at least $253 million of one kind of structured note sold by JPMorgan between 2011 and 2014.  In one case, the bonds were inflated by 15%. 

It is SLCG’s contention that the bank overstated how much some of its structured notes were worth by failing to account for fees for the indexes that determined the payouts on the securities.  SLCG calculated an estimated value of the 10 largest such securities sold by JPMorgan between 2011 and 2013 as ranging from 67.5 to 85.5 cents on the dollar. In the case of the bond worth 85.5 cents, JPMorgan had disclosed an estimated value of 98.6 cents, or about 15% higher. Many of the JPMorgan notes were sold without the bank having disclosed estimated values, according to the report.

Structured notes have grown increasingly attractive to mom-and-pop investors that are starved for income in a low-interest-rate environment. The bonds often pay higher interest than regular corporate debt and are usually created by combining a bond with a derivative that offers extra market exposure, as well as added risk. Last year banks issued about $43.5 billion of structured debt that was registered with the SEC, according to data compiled by Bloomberg - up about 13% from 2012 levels.