In the world of SEC Form 4 filings, insider selling activity is sometimes a result of profit taking by corporate executives, as stock options are exercised and subsequently sold at a higher market price. In some cases, however, insiders actively sell holdings that were in their portfolio for a significant period of time – this represents a far more bearish signal. In recent weeks, the headlines have been filled with the financial floundering of JPMorgan Chase (NYSE: JPM), as the company reported a $2 billion trading loss nearly two weeks ago. Because JPM’s error is tied to credit default swaps on corporate debt, it seems that these losses are going to get worse – in the $6 to $7 billion range – as the markets continue to weep. By the looks of it, this is a self-fulfilling prophecy with no easy way out. Interestingly, four of the bank’s executives sold nearly 150,000 shares of JPM back in January for a combined value of $5.4 million. Below are the details surrounding each of these insiders and the trades that were made.
James John Hogan: As the Chief Risk Officer of JP Morgan Chase, John Hogan has been in the media spotlight as of late. Once the individual unit responsible for the bank’s heavy trading losses reached a critical mass in late April, Hogan himself took over the regular risk management responsibilities. Three months earlier in late January, he decreased his ownership of JPM by half, selling over 40,000 shares for a total value of $1.5 million. This is the only transaction Hogan has made of any kind over the past three years.
M. Stephen Cutler: Stephen Cutler has been the bank’s General Counsel since 2007, and before this, he served as the Director of Enforcement at the Securities and Exchange Commission from 2001 to 2005. During his service with the SEC, Cutler played a significant role in the investigations of Enron, WorldCom and Tyco, as well as the tightening of financial reporting regulations on banks including JPMorgan. Two days before Hogan’s sale, Cutler trimmed 12,500 shares from his portfolio at a price of $37.42 each. Five months earlier, he made a similar transaction, selling 10,000 shares. Altogether, these two sales were worth nearly $900,000.
Gordon Smith: Gordon Smith has served as the head of the bank’s Card Services branch since 2007. In addition to this responsibility, Smith also oversees the banks Student Lending division, though it was announced last month that JPMorgan would be leaving that business, with executives citing problems of high risk and low profitability. In mid-January of this year, Smith sold 40,000 shares of JPM for a total value of $1.5 million.
E. James Staley: Responsible for the biggest transaction of all four insiders listed, James Staley is currently the head of JPMorgan’s Investment Banking branch, and was also one of the highest paid banking professionals in 2011, as he earned $16 million last year. This was higher than the salaries of the CEOs of Goldman Sachs (GS), Citigroup (C), Bank of America (BAC), and Morgan Stanley (MS). In early January, Staley sold 55,000 shares of JPM at $35.21 a piece, for a total value of nearly $2 million. This transaction represented a 32 percent reduction in Staley’s total holdings of his company. It was his first sale since 2009.
While the total value of these transactions pale in comparison to the trading losses at JPMorgan Chase, it is still important for investors to take notice. Since this round of selling began, Hogan, Cutler, Smith and Barney have avoided a 4 percent loss. It remains to be seen what will become of the bank’s fate, but it is always important to track insider transactions. For the up-to-the-minute information regarding insider trading activity, visit Insider Monkey’s comprehensive database.
