The Real Deal Miami

Pending financial regulations ignored JPMorgan Chase real estate fund

June 27, 2012 03:45PM

A new JPMorgan Chase real estate fund has raised eyebrows by flaunting proposed new financial regulations, the Wall Street Journal reported.

Junius Real Estate Partners, a new fund from the bank, got 100 percent of its equity from the bank itself, a blatant violation of the Volcker rule, a proposed section of the Dodd–Frank Wall Street Reform and Consumer Protection Act. Dodd-Frank is a federal statute enacted two years ago whose finer points are still being sorted out by regulators. When Junius began raising money for its $750 million fund, JPMorgan planned to contribute 3 percent of the fund’s total capital, which would have complied with the pending regulations. After fundraising was slow, the bank decided to contribute all the capital. Unfortunately, this may meet the definition of “proprietary trading,” the practice explicitly banned in Volcker.

“It’s proprietary trading until they get out of it,” meaning divest from the fund, Michael Greenberger, a professor at the University of Maryland law school, told the Journal. [WSJ]