NEW YORK ( TheStreet) -- JPMorgan Chase ( JPM) released on Wednesday the results of an internal probe into the bank's infamous trading loss in 2012 that A management task force led by Mike Cavanagh, current co-CEO of the Corporate and Investment Bank at JPMorgan, was set up last year to investigated the losses at the bank's chief investment office (CIO). While the task force blamed direct responsibility for the losses with the traders for designing and implementing their flawed trading strategy, it also laid a fair share of the blame with the firm's senior management. Specifically, it blames Chief Investment Officer Ina Drew for failing to ensure that the CIO management understood the trading strategy and appropriately monitor it, failing to ensure that the CIO controls were effective and for failing to appreciate the magnitude and significance of the change in the synthetic credit portfolio in the first quarter of 2012. It also blames Barry Zubrow, then Chief Risk Officer, for failures of the CIO risk organization. It also concluded that former CFO Doug Braustein failed to ask more questions or seek additional information about the evolution of the portfolio in the first quarter. The task force goes relatively easy on Dimon, citing his own comments on his negligence right from the start. "CIO, particularly the Synthetic Credit Portfolio, should have gotten more scrutiny from both senior management, and I include myself in that, and the Firm-wide Risk control function," Dimon said in reviewing the losses last year. "As Chief Executive Officer, Mr. Dimon could appropriately rely upon senior managers who directly reported to him to escalate significant issues and concerns. However, he could have better tested his reliance on what he was told," the report said. "Importantly, once Mr. Dimon became aware of the seriousness of the issues presented by CIO, he responded forcefully by directing a thorough review and an internal program of remediation. Mr. Dimon reports to the Board, and the Board will weigh the extent of Mr. Dimon's responsibility. Separately, the board decided to cut Dimon's pay in half to $11.5 million in 2012, in light of the bungled up trade.
In a media conference call, Dimon said he respected the board's decision. "They had a tough job. They had to see the positives, which were large and there was this huge, embarrassing mistake." Among the task force main observations: The CIO management established "competing and inconsistent priorities" for the synthetic credit portfolio. Two, trading strategies to achieve the various priorities were poorly conceived and not fully understood by the CIO management. Three, the CIO management failed to obtain robust, detailed reporting on the activity in the portfolio. CIO personnel at all levels "failed to adequately respond to and escalate (including to senior Firm management and the Board) concerns" that were raised at various points during the trading." Certain traders "did not show the full extent of the Synthetic Credit Portfolio's Losses" and CIO provided "excessively optimistic and inadequately analyzed estimates of the Synthetic Credit Portfolio's future performance" to the senior management in the days leading up to the earnings call on April 13, when Dimon and Braunstein dismissed reports of the London trades as a "tempest in a teapot." The task force cited remedial steps, many of which have already been taken by the company including replacing individuals responsible for the loss. Dimon told reporters during the media call that the losses at the CIO were close to being a "non-issue" for the bank. JPMorgan suffered a modest loss from the synthetic credit positions in the fourth quarter but Dimon does not expect the losses to be material to the public anymore in the future. Still, JPMorgan is under investigation from regulators regarding the CIO loss. Earlier this week, the Federal Reserve and the OCC ordered the bank to enhance its risk management system after an investigation into the trading losses found deficiencies in the bank's risk controls. No monetary penalty was imposed but the regulators did not rule out penalties in the future. The U.K.'s Financial Services Authority and the U.S. Senate Permanent Sub Committee are also conducting separate investigations. JPMorgan meanwhile reported record profits for 2012. Read more on that here. --Written by Shanthi Bharatwaj in New York >To contact the writer of this article, click here: Shanthi Bharatwaj. >To follow the writer on Twitter, go to http://twitter.com/shavenk. >To submit a news tip, send an email to: firstname.lastname@example.org.