[ by Howard Haykin ]

A New York junior research analyst, working for JPMorgan's Exploration and Production research team, allegedly breached her duties under the firm’s confidentiality policies and procedures when she disclosed on a limited basis nonpublic information concerning material errors that had been made in previously issued research that had been previously released. 

Profile of Respondent. Anne Patricia Cameron was a junior research analyst in the NY, NY office of JPMorgan from July 2008 to August 2010. JPMorgan filed a Form U-5 for Cameron in August 2010. Since November 2010, Cameron has been associated with another FINRA member firm as a research analyst. 

As a junior analyst, Cameron assisted in the coverage of 15 oil and gas companies, including ATP, an energy firm based in Houston that primarily operates oil platforms in the Gulf of Mexico and the North Sea.  Under the guidance of a JPMorgan senior research analyst, Cameron drafted research reports about ATP that JPMorgan disseminated to its institutional sales force and to the public through various outlets, including the firm's website.

Downgrade Report on ATP Released. JPMorgan initiated coverage of ATP on 3/25/10 and, in June, Cameron worked with the senior analyst on pricing and models of the companies covered, and the review of ATP led to the conclusion that the stock was overvalued - the senior analyst decided to downgrade ATP.

Cameron drafted the downgrade report of ATP, which lowered the firm's research  rating on ATP along with a lower price target.  The report's central conclusion in support of the downgrade was that "[b]ased on our estimates, ATP needs an additional $500MM of financing .. .." 

The downgrade report was dated 7/13/10 and disseminated to the public shortly after midnight that day.  On 7/13, ATP shares opened down 7% from the prior day's close, and over the next 2 days the price dipped to as much as 15% below the pre-report price.

Discovery of Error in 7/13 Report. On the morning the downgrade report was issued, ATP management complained to JPMorgan that the need for $500mn in financing was erroneous.  Cameron rechecked the financial model they had used and determined there was, in fact, a computational error in the model.

Cameron had caused the error by double-counting certain principal payment overrides in the report's spreadsheet model.  After being adjusted, the indicated that ATP's financing need was reduced by approximately $450 million.

On July 13, Cameron and others at JPMorgan began working to correct the error, with the intention of promptly releasing a correction report. At that time, the existence and scope of the error was not public information.  The Correction Report was released just after the close of trading on 7/15. 

Cameron Discloses Nonpublic Information Before Correction Report Released. Before the error was publicly disclosed, apprised numerous people about the error - by email, phone, and in face-to-face conversation. 

E-mails. She sent Cameron several e-mails to non-JPMorgan individuals about the error in the downgrade report.  She e-mailed her boyfriend on 7/14 after 5 p.m. saying "they [ATP] have made it very clear what a whopping mistake was buried in the note."   [Bad Move!  Her boyfriend was a buy-side analyst at a hedge fund.]

She also sent emails ("Storm Brewing" in the subject line) to another friend who worked for a different hedge fund - she recounted the whole scenario and asked for advice on how to avoid getting fired. 

Phone Calls, Meetings. Cameron had conversations with people outside of JPMorgan about the error in the downgrade report prior to the error being publicly disclosed.  She called her boyfriend on 7/13, when the error was discovered and told him of her discovery.  She also told a 3rd outside JPMorgan with whom she was having dinner on 7/14. 

JPMORGAN Research Analyst Pols and Procedures.   The firm's manual, which applied to everyone in Research, contained a number of confidentiality requirements that directly addressed Cameron's duty with respect to the nonpublic information concerning the ATP error.  Specifically, the pols and procedures prohibited Cameron from disclosing nonpublic information obtained in the course of her duties at JPMorgan to individuals outside the research department unless specifically permitted in the policies or approved by the firm's legal or compliance departments, neither of which applied to the ATP error.

Cameron's Breach of Duty and Sanction. In breaching her duties and acting contrary to firm policies and procedures, Cameron's disclosures of nonpublic information concerning the error were inconsistent with high standards of commercial honor and just and equitable principles of trade - violations of FINRA Rule 2010.

To settle FINRA charges, Cameron agreed to a $20K fine and 15-day suspension.  And, of course, shortly thereafter, the firm terminated her employment.  

This case was reported in FINRA Disciplinary Actions for September 2012.  For further details, go to:  [FINRA AWC  #2010023578401, 7/12/12].