FISMA & OMB Memorandum M-07-16 · 2016-03-14 · Response of the Office of Chief Counsel...

March 10, 2016 Martin P. Dunn Morrison & Foerster LLP [email protected] Re: JPMorgan Chase & Co. Incoming letter dated January 14, 2016 Dear Mr. Dunn: This is in response to your letters dated January 14, 2016 and February 18, 2016 concerning the shareholder proposal submitted to JPMorgan Chase by Jing Zhao. We also have received a letter from the proponent dated January 19, 2016. Copies of all of the correspondence on which this response is based will be made available on our website at http://www.sec.gov/divisions/corpfin/cf-noaction/14a-8.shtml. For your reference, a brief discussion of the Division’s informal procedures regarding shareholder proposals is also available at the same website address. Sincerely, Matt S. McNair Senior Special Counsel Enclosure cc: Jing Zhao ***FISMA & OMB Memorandum M-07-16***

March 10, 2016 Response of the Office of Chief Counsel Division of Corporation Finance Re: JPMorgan Chase & Co. Incoming letter dated January 14, 2016 The proposal recommends that the company adopt an executive compensation philosophy with consideration of relevant social factors to improve the company’s ethical conduct and public reputation. We are unable to concur in your view that JPMorgan Chase may exclude the proposal under rule 14a-8(i)(3). We are unable to conclude that the proposal is so inherently vague or indefinite that neither the shareholders voting on the proposal, nor the company in implementing the proposal, would be able to determine with any reasonable certainty exactly what actions or measures the proposal requires. Accordingly, we do not believe that JPMorgan Chase may omit the proposal from its proxy materials in reliance on rule 14a-8(i)(3). We are unable to concur in your view that JPMorgan Chase may exclude the proposal under rule 14a-8(i)(7). In arriving at this position, we note that the proposal focuses on senior executive compensation. Accordingly, we do not believe that JPMorgan Chase may omit the proposal from its proxy materials in reliance on rule 14a-8(i)(7). Sincerely, Coy Garrison Attorney-Adviser

DIVISION OF CORPORATION FINANCE INFORMAL PROCEDURES REGARDING SHAREHOLDER PROPOSALS

The Division of Corporation Finance believes that its responsibility with respect to matters arising under Rule 14a-8 [17 CFR 240.14a-8], as with other matter under the proxy rules, is to aid those who must comply with the rule by offering informal advice and suggestions and to determine, initially, whether or not it may be appropriate in a particular matter to recommend enforcement action to the Commission. In connection with a shareholder proposal under Rule 14a-8, the Division’s staff considers the information furnished to it by the Company in support of its intention to exclude the proposals from the Company’s proxy materials, as well as any information furnished by the proponent or the proponent’s representative.

Although Rule 14a-8(k) does not require any communications from shareholders to the

Commission’s staff, the staff will always consider information concerning alleged violations of the statutes administered by the Commission, including argument as to whether or not activities proposed to be taken would be violative of the statute or rule involved. The receipt by the staff of such information, however, should not be construed as changing the staff’s informal procedures and proxy review into a formal or adversary procedure.

It is important to note that the staff’s and Commission’s no-action responses to

Rule 14a-8(j) submissions reflect only informal views. The determinations reached in these no-action letters do not and cannot adjudicate the merits of a company’s position with respect to the proposal. Only a court such as a U.S. District Court can decide whether a company is obligated to include shareholders proposals in its proxy materials. Accordingly a discretionary determination not to recommend or take Commission enforcement action, does not preclude a proponent, or any shareholder of a company, from pursuing any rights he or she may have against the company in court, should the management omit the proposal from the company’s proxy material.

MORRISON I FOERSTER

February 18, 2016

2000 PENNSYLVANIA AVE., NW

WASHINGTON, D.C.

20006-1888

TELEPHONE: 202.887.1500

FACSIMILE: 202.887.0763

\XIWW.MOFO.COM

VIA E-MAIL ([email protected])

Office of Chief Counsel Division of Corporation Finance U.S. Securities and Exchange Commission 100 F Street, NE Washington, DC 20549

Re: JPMorgan Chase & Co. Shareholder Proposal of Jing Zhao

Dear Ladies and Gentlemen:

MORRISON & FOERSTER LLP

BEIJlNG, BERLIN, BRUSSELS, DENVER, HONG KONG, LONDON, LOS ANGELES,

NE\V YORK, NORTHERN VIRGINIA,

PALO ALTO, SACRA:-..IENTO, S.AN DIEGO,

S1\N FRANCISCO, SHANGHAI, SINGAPORE,

TOKYO, WASHINGTON, D.C.

Writer's Direct Contact

+ 1 (202) 778.1611 [email protected]

1934 Act/Rule 14a-8

This letter concerns the request, dated January 14, 2016 (the "Initial Request Letter"), that we submitted on behalf of our client JPMorgan Chase & Co., a Delaware corporation (the "Company"), seeking confirmation that the staff (the "Staff') of the Division of Corporation Finance (the "Division") of the U.S. Securities and Exchange Commission (the "Commission") will not recommend enforcement action to the Commission if, in reliance on Rule 14a-8 under the Securities Exchange Act of 1934 (the "Exchange Act"), the Company omits the shareholder proposal (the "Proposaf') and supporting statement (the "Supporting Statement") submitted by Jing Zhao (the "Proponent") on November 5, 2015, from the Company's proxy materials for its 2016 Annual Meeting of Shareholders (the "2016 Proxy Materials"). The Proponent submitted a letter to the Staff, dated January 19, 2016 (the "Proponent Letter"), expressing the view that the Proposal and Supporting Statement may not be excluded from the 2016 Proxy Materials.

We submit this letter on behalf of the Company to supplement the Initial Request Letter and respond to the views expressed in the Proponent Letter. We also renew our request for confirmation that the Staff will not recommend enforcement action to the Commission if the Company omits the Proposal and Suppmiing Statement from its 2016 Proxy Materials in reliance on Rule 14a-8.

We have concurrently sent a copy of this correspondence to the Proponent.

Office of Chief Counsel Division of Corporation Finance U.S. Securities and Exchange Commission February 18, 2016 Page2

I. EXCLUSION OF THE PROPOSAL

A. The Proposal May Be Excluded in Reliance on Rule 14a-8(i)(3) Because It is Materially False and Misleading

As discussed in the Initial Request Letter, the Staff has consistently found that a proposal is inherently vague and indefinite and, therefore, may be omitted from a company's proxy materials if it fails to adequately define key terms or provide sufficient guidance regarding the manner in which the proposal should be implemented. Further, the Staff has consistently concurred that specific standards that are integral to a proposal must be sufficiently explained in the proposal or supporting statement.

The Initial Request Letter expressed the view that the Proposal may be properly excluded under Rule 14a-8(i)(3) because the terms "economic condition" and "average income" are key to the Proposal but are unclear because the Proposal neither explains the meaning of these key terms nor discusses how these terms should be applied to the Proposal. The Proponent Letter does not address this point directly; instead, it merely states that the Company "retains the flexibility to implement the proposal." As discussed in the Initial Request Letter, while each of the words comprising these terms have an ordinary meaning in isolation, put together, each twoword term is likely to cause confusion as to the information referenced and the application of that term to the Proposal. For example, there is no indication in the Proposal or the Supporting Statement as to whose "economic condition" or "average income" is being referenced in the Supporting Statement or to the type of data the Company would use to determine "economic condition" and "average income." As noted in the Initial Request Letter, given the Company's size, scope and complex operations, there are innumerable manners in which these terms could be understood by both the shareholders in voting on the Proposal and the Company in implementing the Proposal if adopted.

Accordingly, as discussed in the Initial Request Letter, neither the shareholders voting on the Proposal, nor the Company in implementing the Proposal, would be able to understand with any reasonable certainty exactly what the requested executive compensation philosophy requires. As such, the Company continues to be of the view that the Proposal is materially vague and misleading and, as such, the Company may properly omit the Proposal and Supporting Statement in reliance on Rule 14a-8(i)(3).

B. The Proposal May Be Excluded in Reliance on Rule 14a-8(i)(7) Because It Relates To The Company's Ordinary Business Operations

As discussed in the Initial Request Letter, the Proposal may be properly excluded in reliance on Rule 14a-8(i)(7) because the action sought by the Proposal deals with general employee compensation. As discussed in the Initial Request Letter, the Proposal "focus[ es] on compensation at all levels at the Company and not merely senior executive compensation." In this regard, the Proposal and Supporting Statement relate broadly to an uncertain group of

Office of Chief Counsel Division of Corporation Finance U.S. Securities and Exchange Commission February 18, 2016 Page 3

Company personnel whose compensation is determined by the Company's Compensation Committee. The Supporting Statement makes numerous references to the Proposal's intended impact upon "wage inequality" at the Company. As addressed in the Initial Request Letter, the Supporting Statement discussion expands the Proposal to a category of employees well below the executive officer level and, as such, states directly that the Proposal does not relate solely to senior executive compensation; instead, it provides that the Proposal relates to general employee compensation as well as senior executive compensation.

The Staff has consistently detennined that proposals relating to employee compensation involve matters relating to ordinary business and therefore may be excluded under Rule 14a-8(i)(7). In addition, the Staff has consistently determined that proposals addressing both executive compensation and non-executive, or general employee, compensation are excludable under Rule 14a-8(i)(7). See, e.g., Johnson Controls (Oct. 16, 2012) (noting "[T]he proposal relates to compensation that may be paid to employees generally and is not limited to compensation that may be paid to senior executive officers and directors. Further, proposals that concern general employee compensation matters are generally excludable under rule 14a-8(i)(7)."). The Initial Request Letter contains further discussion of the Staff precedent permitting exclusion of proposals that are not limited solely to executive compensation, such as the Proposal.

In the Proponent Letter, the Proponent states that the Proposal is not excludable in reliance on Rule 14a-8(i)(7), as the Proposal is distinguishable from a substantially similar proposal in which the Staff concurred in its exclusion (Apple Inc. (Nov. 16, 2015)). In Apple, the Staff concurred in the exclusion of the proposal, as "the proposal relates to compensation that may be paid to employees generally and is not limited to compensation that may be paid to senior executive officers and directors." The proposal in Apple recommended that the company reform its compensation committee to include outside independent experts from the general public to adopt new compensation principles responsive to America's economy, such as unemployment, working hours and wage inequality. While, as noted in the Initial Request Letter, the Resolved clause of the Proposal at issue recommends that the Company adopt an "executive compensation philosophy with consideration of relevant social factors to improve the Firm's ethical conduct and public reputation" (emphasis added), Staff Legal Bulletin No. 14B (June 28, 2005) states the analysis under Rule 14a-8(i)(7) requires consideration of "both the proposal and the supporting statement as a whole." Counter to the statements in the Proponent Letter, the Supporting Statement's reference to the role of the Compensation Committee in "assist[ing] the Board in its oversight of the Firm's compensation programs" and its "review[] and approv[al] [of] the Firm's overall compensation philosophy and practices" demonstrates the Proposal's focus on compensation at all levels at the Company and not merely senior executive compensation.

The Proponent Letter also asserts that the Company may not omit the Proposal from its 2016 Proxy Materials because the Proposal does not micromanage the Company. "Micromanagement" is the second of two considerations related to the Rule 14a-8(i)(7) ordinary

Office of Chief Counsel Division of Corporation Finance U.S. Securities and Exchange Commission February 18, 2016 Page 4

business exclusion. Exchange Act Release No. 40018, Amendments to Rules on Shareholder Proposals, [1998 Transfer Binder] Fed. Sec. L. Rep. (CCH) 86,018, at 86,017-18 (May 21, 1998). The Company is of the view that it may exclude the Proposal because it relates to ordinary business matters, specifically general employee compensation; as such, the Company did not express the view that it may exclude the Proposal because it "micromanages" its ordinary business decisions. Accordingly, the Proponent's claim that the Proposal does not "micromanage" the Company's ordinary business decisions is irrelevant with regard to views set forth in the Initial Request Letter.

Accordingly, as the Proposal relates to a broad category of employees who are beyond the category of senior executive officers, it relates, at least in part, to general employee compensation matters. The Company, therefore, continues to be of the view that the Proposal relates, in part, to ordinary business operations and, as such, the Company may properly omit the Proposal and Supporting Statement in reliance on Rule 14a-8(i)(7). Further, the Initial Request Letter sets forth the Company's view that the Proposal may be excluded in reliance on Rule 14a-8(i)(7), as it relates to the Company's Code of Ethics for Financial Professionals and Code of Conduct. The Company continues to be of this view, which the Proponent Letter does not dispute.

II. CONCLUSION

Based on the discussion above and the discussion in the Initial Request Letter, the Company continues to be of the view that it may properly omit the Proposal and Supporting Statement from its 2016 Proxy Materials in reliance on Rule 14a-8. As such, we respectfully request that the Staff concur with the Company's view and not recommend enforcement action to the Commission ifthe Company omits the Proposal and Supporting Statement from its 2016 Proxy Materials. Ifwe can be of further assistance in this matter, please do not hesitate to contact me at (202) 778-1611.

Sincerely,

Martin P. Dunn of Morrison & Foerster LLP

cc: Jing Zhao Anthony Horan, Corporate Secretary, JPMorgan Chase & Co.

1

January 19, 2016

Via email to: [email protected]

U.S. Securities and Exchange Commission

Division of Corporation Finance

Office of Chief Counsel

100 F Street, NE

Washington, DC 20549-2736

Re: Shareholder Proposal for Inclusion in JPMorgan Chase & Co. Proxy Statement

Ladies and Gentlemen:

This is a brief reply to the January 14, 2016 letter of Morrison Foerster LLP to rebut

JPMorgan Chase & Co. (the Company)’s baseless “bases” to exclude my proposal to its

2016 proxy statement.

My proposal is not materially false and misleading. For the purpose not to

micro-manage the Company's ordinary business operations, the proposal does not

redefine the commonly used terms “economic condition, unemployment and average

income” so the company retains the flexibility to implement the proposal. The letter

actually acknowledged that “each of the words comprising these terms has an ordinary

meaning” (page 4).

My proposal does not micro-manage matters relating to the Company's ordinary

business operations. The letter (page 6) cited the case of my proposal to Apple Inc. (Nov.

16, 2015). However, while my proposal to Apple says “to adopt new compensation

principles” so there seems reasonable relating to general employee compensation, my

proposal to the Company clearly says “executive compensation philosophy” only without

any ambiguity relating to general employee compensation.

Should you have any questions, please contact me at or

***FISMA & OMB Memorandum M-07-16***



2

Respectfully,

Jing Zhao

Cc: Martin P. Dunn at [email protected], Rose Zukin at [email protected]

MORRISON I FOERSTER

January 14, 2016

2000 PENNSYLVANIA A VE., NW

WASHINGTON, D.C.

20006-1888

TELEPHONE: 202.887.1500

FACSIMILE: 202.887.0763

W\VW.MOFO.COM

VIA E-MAIL ([email protected])

Office of Chief Counsel Division of Corporation Finance U.S. Securities and Exchange Commission 100 F Street, NE Washington, DC 20549

Re: JPMorgan Chase & Co. Shareholder Proposal of Jing Zhao

Dear Ladies and Gentlemen:

MORRISON FOERSTER LLP

NE\\1 YORK, SA!\' FR1\NCJSCO,

LOS ANGELES, PALO AL TO,

SACRAMENTO, SAN DIEGO,

DEN\'ER, NORTHERN VIRGIN!:\,

\VASHINGTON, D.C.

TOKYO, LONDON, BERLIN, 13Rl'SSELS,

BEIJING, SHANGHAI, JIONG KONG,

SINGAPORE

Writer's Direct Contact +1(202)778.1611

[email protected]

1934 Act/Rule 14a-8

We submit this letter on behalf of our client JPMorgan Chase & Co., a Delaware corporation (the "Company"), which requests confirmation that the staff (the "Sta.fl') of the Division of Corporation Finance of the U.S. Securities and Exchange Commission (the "Commission") will not rec01mnend enforcement action to the Commission if, in reliance on Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Company omits the enclosed shareholder proposal (the "Proposaf') and supporting statement (the "Supporting Statement') submitted by Jing Zhao (the "Proponent") from the Company's proxy materials for its 2016 Annual Meeting of Shareholders (the "2016 Proxy Mate rials").

Pursuant to Rule 14a-8G) under the Exchange Act, we have:

• filed this letter with the Commission no later than eighty (80) calendar days before the Company intends to file its definitive 2016 Proxy Materials with the Commission; and

***FISMA & OMB MEMORANDUM M-07-16******FISMA & OMB MEMORANDUM M-07-16******FISMA & OMB MEMORANDUM M-07-16***

MORRISON I FOERSTER

Office of Chief Counsel Division of Corporation Finance U.S. Secmities and Exchange Commission January 14, 2016 Page 3

B. Tile Proposal May Be Omitted in Reliance On Rule 14a-8(i)(3), As It Is So Vague and Indefinite As To Be Materially False and Misleading

Rule 14a-8(i)(3) permits a company to omit a proposal or supporting statement, or portions thereof, that are contrary to any of the Commission's proxy rules, including Rule 14a-9, which prohibits materially false and misleading statements in proxy materials. Pmsuant to Staff Legal Bulletin No. 14B (Sept. 15, 2004), reliance on Rule 14a-8(i)(3) to exclude a proposal or portions of a supporting statement may be appropriate in only a few limited instances, one of which is when the language of the proposal or the supporting statement renders the proposal so vague or indefinite that "neither the stockholders voting on the proposal, nor the company in implementing the proposal (if adopted), would be able to determine with any reasonable certainty exactly what actions or measures the proposal requires." See Philadelphia Electric Company (Jul. 30, 1992). The Staff has further explained that a shareholder proposal can be sufficiently misleading and therefore excludable under Rule 14a-8(i)(3) when the company and its shareholders might interpret the proposal differently such that "any action ultimately taken by the [ c ]ompany upon implementation [of the proposal] could be significantly different from the actions envisioned by the shareholders voting on the proposal." Fuqua Industries, Inc. (Mar. 12, 1991).

If a proposal provides standards or criteria that a company is intended to follow, the proposal and supporting statement must provide reasonable certainty to both the company and its shareholders with regard to the meaning and operation of those standards and criteria; the proposal and supp01iing statement cannot provide guidance that is uncertain, vague, or overly general. The Staff has consistently concurred that specific standards that are integral to a proposal must be sufficiently explained in the proposal or supporting statement and, as such, when a proposal fails to adequately define key terms or provide sufficient guidance regarding the manner in which the proposal should be implemented, that proposal may be omitted as vague and indefinite. See, e.g., Morgan Stanley (Mar. 12, 2013) (concurring with the omission of a proposal requesting the appointment of a committee to explore "extraordinary transactions" that could enhance stockholder value was vague and indefinite); The Boeing Co. (Mar. 2, 2011) (concurring with the omission of a proposal as vague and indefinite where the proposal requested, among other things, that senior executives relinquish certain "executive pay rights" because such phrase was not sufficiently defined); AT&T Inc. (Feb. 16, 2010) (concurring with the omission of a proposal as vague and indefinite where the proposal sought disclosures on, among other things, payments for "grassroots lobbying" without sufficiently clarifying the meaning of that term); Puget Energy Inc. (Mar. 1, 2002) (concurring with the omission of a proposal as vague and indefinite where the proposal requested a policy of "improved corporate governance"); and Norfolk Southern Corp. (Feb. 13, 2002) (concurring with the omission of a proposal as vague and indefinite where the proposal requested that the board of directors "provide for a shareholder vote and ratification,

MORRISON I FOERSTER

Office of Chief Counsel Division of Corporation Finance U.S. Securities and Exchange Commission January 14, 2016 Page4

in all future elections of Directors, candidates with solid background, experience, and records of demonstrated performance in key managerial positions within the transportation industry").

The Proposal provides that, in modifying its executive compensation philosophy to take into account relevant social factors, the Company's Compensation & Management Development Committee ("Compensation Committee") may consider "economic condition, unemployment and average income." The terms "economic condition" and "average income" are key to the Proposal because they are examples of the "social factors" that are to guide the Compensation Committee in revising its executive compensation philosophy to implement the Proposal. However, similar to the proposals in Morgan Stanley, Boeing and AT&T, the Proposal does not define or explain the meaning of these key terms. Rather, the terms "economic condition" and "average income" are unclear, undefined by the Proposal and without an ordinary, commonly understood meaning. While each of the words comprising these terms has an ordinary meaning in isolation, put together, the words in each phrase are likely to cause confusion as to what type of information is being referenced.

There is no indication in the Proposal as to whose "economic condition" or "average income" is being referenced in the Supporting Statement or the type of data the Company would use to determine "economic condition" and "average income." Indeed, given the Company's size and scope and the complexity of its operations, there are innumerable manners in which these terms could be defined. Further, even ifthere was a commonly understood means to define these terms, the application of that definition across the Company's operation would present significant variation in its application. In this regard, as a global financial services firm, the Company employs approximately 240,000 people, working in more than 60 countries and 2,100 U.S. cities across four major business segments. The "economic condition" and "average income" varies substantially among each U.S. city and each country. Further, many economic factors (e.g., gross domestic product, inflation and interest rates), individually and in the aggregate, can comprise "economic condition." Again, while the meaning of these terms is fundamentally unclear, even an understanding of the terms would not prevent the Proposal from being fundamentally false and misleading, as neither the Company nor its shareholders would have any level of reasonable certainty as to how changes to the Company's executive compensation philosophy could take into account multiple "economic conditions" or the "average income" among individuals employed across the globe. The vague references to "economic condition" and "average income" make it impossible for the Company and shareholders alike to determine the extent and nature of changes to be made to the executive compensation philosophy that the Proposal is seeking.

MORRISON I FOERSTER

Office of Chief Counsel Division of Corporation Finance U.S. Securities and Exchange Commission January 14, 2016 Page 5

Accordingly, neither the shareholders voting on the Proposal, nor the Company in implementing the Proposal, would be able to understand with any reasonable certainty exactly what the revised executive compensation philosophy requires, based on the terms of the Proposal. The Company is, therefore, of the view that it may properly omit the Proposal and Supporting Statement in reliance on Rule 14a-8(i)(3), as it is so vague and indefinite as to be materially false and misleading.

C. The Proposal May Be Omitted In Reliance On Rule 14a-8(i)(7), As It Relates To The Company's Ordinary Business Operations

Rule 14a-8(i)(7) pe1mits a company to omit from its proxy materials a shareholder proposal that relates to the company's "ordinary business operations." According to the Commission, the underlying policy of the ordinary business exclusion is "to confine the resolution of ordinary business problems to management and the board of directors, since it is impracticable for shareholders to decide how to solve such problems at an annual shareholders meeting." Exchange Act Release No. 40018, Amendments to Rules on Shareholder Proposals, [1998 Transfer Binder] Fed. Sec. L. Rep. (CCH) 86,018, at 80,539 (May 21, 1998) (the "1998 Release"). In the 1998 Release, the Commission described the two "central considerations" for the ordinary business exclusion. The first is that certain tasks are "so fundamental to management's ability to run a company on a day-to-day basis that they could not, as a practical matter, be subject to direct shareholder oversight." The second consideration relates to "the degree to which the proposal seeks to 'micro-manage' the company by probing too deeply into matters of a complex nature upon which shareholders, as a group, would not be in a position to make an informed judgment." Id. at 86,017-18 (footnote omitted).

1. The Proposal Relates to Compensation That May Be Paid to Employees Generally and Is Not Limited to Compensation That May Be Paid to Senior Executive Officers and Directors

As noted in Staff Legal Bulletin No. 14A (July 12, 2002) ("SLB 14A"), proposals relating to employee compensation are a matter of ordinary business, and companies are permitted to omit proposals relating to such matters pursuant to Rule 14a-8(i)(7). The Staff has regularly concurred that proposals addressing both executive compensation and nonexecutive compensation relate to the fundamental business function of establishing general employee compensation. The Proposal is properly excludable as relating to general employee compensation because it is not limited to senior executive compensation. Although the Proposal references "an executive compensation philosophy," the Supporting Statement makes clear that the Proposal is not so limited. In this regard, the Supporting Statement references the role of the Company's Compensation Committee and states that the

MORRISON I FOERSTER


Compensation Committee "assists the Board in its oversight of the Firm's compensation programs and reviews and approves the Firm's overall compensation philosophy and practices." The Supporting Statement also notes that the Committee "reviews and approves the Firm's compensation philosophy, which guides how the Firm's compensation plans and programs are designed." Further, the Supporting Statement's numerous references to the Proposal's intended impact upon "wage inequality" at the Company evidence its focus on compensation at all levels at the Company and not merely senior executive compensation.

The Compensation Committee would be responsible for implementing the Proposal. The Compensation Committee is responsible for making compensation decisions and establishing compensation policies affecting a much broader class of employees than just senior executives and directors. Notably, the charter of the Compensation Committee charges it with responsibility for "review[ing] and recommend[ing] employee equity-based plans," and to "approve all salary, short-term incentive compensation, and long-term incentive awards for," among others, "Section 16 officers" (emphasis added). In addition, the Company's annual performance management process related to more senior employeesboth executive officers and members of the general workforce-includes, among other tools, a standard, firm-wide survey to reinforce the Company's conduct and controls culture. As stated on page 21 of the Company's report How We Do Business, attached hereto as Exhibit B, the first question in that survey asks whether the employee exemplifies the highest standard of ethics and integrity. The Company's performance management process regarding compensation of senior employees not identified by the Company as executive officers illustrates the impact of ethical conduct on general employee compensation and, as such, demonstrates the effect of the Proposal on compensation of the Compariy' s general workforce. As the Proposal is directed to the Compensation Committee and the Supporting Statement references that Committee's role in general employee compensation and demonstrates the Proposal's intent to impact compensation across the Company, the Proposal relates, at least in part, to the Company's compensation of its general workforce.

The Staff has consistently concurred with the omission of similar proposals from company proxy materials as relating to ordinary business operations. Most recently, in Apple Inc. (Nov. 16, 2015), a substantially similar proposal to the Proposal at issue recommended that the company reform its compensation committee to include outside independent experts from the general public to adopt new compensation principles responsive to America's general economy, such as unemployment, working hours and wage inequality. The company expressed the view that the proposal could be excluded in reliance on Rule l 4a-8(i)(7), as the proposal "does not make any attempt to limit its scope to the compensation of senior executives and directors," and "is clearly intended to encourage the adoption of policies related to general employee compensation matters." The Staff concurred with the exclusion of the proposal under Rule l 4a-8(i)(7) as relating to the company's ordinary business

MORRISON I FOERSTER


operations, noting "that the proposal relates to compensation that may be paid to employees generally and is not limited to compensation that may be paid to senior executive officers and directors." Further, in Yum! Brands, Inc. (Feb. 24, 2015), a proposal requested that the compensation committee initiate a review of the company's executive compensation policies and make available upon request a summary of the report, which may include a comparison of the total compensation package of the top senior executives and Yum employees' median wage, and an analysis of changes in the relative size of the gap along with an analysis and rationale justifying any trends evidenced. The Staff concmTed with the exclusion of the proposal under Rule 14a-8(i)(7) as relating to Yum's ordinary business operations, noting "that the proposal relates to compensation that may be paid to employees generally and is not limited to compensation that may be paid to senior executive officers and directors." In addition, in Microsoft Corp. (Sept. 17, 2013 ), a proposal required that the board of directors and/or compensation committee limit the average individual total compensation of senior management, executive and "all other employees the board is charged with determining compensation for" to one hundred times the average individual total compensation paid to the remaining full-time, non-contract employees of the Company. The Staff concurred with the exclusion of the proposal under Rule 14a-8(i)(7) as relating to Microsoft's ordinary business operations, indicating that "the proposal relates to compensation that may be paid to employees generally and is not limited to compensation that may be paid to senior executive officers and directors." See also Johnson Controls (Oct. 16, 2012) (Staff concurring in the exclusion of a proposal requesting that the managing officers of the company repay a portion of their compensation into a bonus pool that would be redistributed to other employees, noting that "the proposal relates to compensation that may be paid to employees generally and is not limited to compensation that may be paid to senior executive officers and directors"); Raytheon Co. (Mar. 11, 1998) (Staff concurring in the exclusion of a proposal urging the company's board of directors to (i) address the issue of "runaway remuneration of CEOs and the widening gap between highest paid and lowest paid" employees, and (ii) publish in its proxy materials the ratio between the total compensation paid to Raytheon's CEO and the total compensation paid to the company's lowest-paid U.S. worker, finding that the proposal related to the company's ordinary business operations).

In this case, although styled as directed towards executive compensation, the Proposal is not limited to executive compensation; it addresses the compensation of the general workforce and, therefore, may be excluded in reliance on Rule 14a-8(i)(7). The Proposal and Supporting Statement, by their terms, apply to general employee compensation matters.

Proposals that concern only senior executive officer and director compensation-as compared to general employee compensation-may not be excluded under Rule 14a-8(i)(7) as they involve "significant social policy issues" that transcend day-to-day business matters,

MORRISON I FOERSTER


and are appropriate for a shareholder vote. See SLB l 4A. However, where a proposal purports to address executive compensation, the Staff allows exclusion of the proposal under Rule 14a-8(i)(7) where the thrust and focus of the proposal relates to a matter of ordinary business. For example, in Exelon Corp. (Feb. 21, 2007), the Staff permitted exclusion of a proposal seeking to prohibit payment of bonuses to the company's executives to the extent that performance goals were achieved through a reduction in retirement benefits. In permitting exclusion, the Staff noted that "although the proposal mentions executive compensation, the thrust and focus of the proposal is on the ordinary business matter of general employee benefits." Similarly to Exelon, the Proposal in this case is focused on nonexecutive pay, an ordinary business matter. Adding references to executive pay in the "Resolved" clause to advocate the Proposal as a significant social policy issue is not persuasive. Accordingly, because the Proposal addresses general compensation matters, the Proposal is properly excludable under Rule 14a-8(i)(7) as relating to ordinary business matters.

2. The Proposal Relates to the Company's Code of Conduct and Code of Ethics for Finance Professionals

The Proposal may be properly omitted in reliance on Rule 14a-8(i)(7) because the action requested relates to the Company's Code of Conduct and Code of Ethics for Financial Professionals (collectively, the "Codes"). This analysis is clear given the express purpose of the Proposal-the requested compensation philosophy is intended to "improve the Firm's ethical conduct and public reputation." Accordingly, the Proposal relates, at least in part, to the Company's ethical practices and policies.

The Staff has consistently concuned with the omission of similar proposals from company proxy materials as relating to ordinary business operations. In The Walt Disney Co. (Dec. 12, 2011), a proposal requested a report on board compliance with Disney's Code of Business Conduct and Ethics for Directors, reporting, among other topics, "any violations of Disney's Codes of Conduct Policy that have occuned, if any." The Staff found that the proposal was excludable as relating to the Company's ordinary business operations, confirming that "[p ]roposals that concern general adherence to ethical business practices are generally excludable under [R]ule 14a-8(i)(7)." In Verizon Communications Inc. (Jan. 10, 2011 ), a proposal requested that the board of directors form a "Corporate Responsibility Committee" to monitor the extent to which Verizon lives up to its claims pertaining to integrity, trustworthiness, and reliability and the extent to which Verizon lives up to its Code of Business Conduct. The Staff found that the proposal was excludable as relating to the Company's ordinary business operations, stating that "[p]roposals that concern general adherence to ethical business practices are generally excludable under [R]ule 14a-8(i)(7)." Similarly, in International Business Machines Corp. (Jan. 7, 2010), a proposal requested that

MORRISON I FOERSTER


officers "clearly and unambiguously restate and enforce the traditional standards of ethical behavior which characterized the way in which IBM conducted its business." The Staff, again, found that the proposal was excludable as relating to the Company's ordinary business operations, reinforcing that "[p ]roposals that concern general adherence to ethical business practices and policies are generally excludable under Rule 14a-8(i)(7)."

The Company's commitment to ethical business practices is reflected in, and substantially implemented through, the Codes, and any change in this area would require changes to the Codes. The Codes address employees' conduct as it relates to various social matters, including human rights, corporate responsibility, and environmental stewardship. One provision of the Codes requires those to whom it applies to observe the Company's Human Rights Statement, which is guided by the principles set forth in the United Nations Universal Declaration of Human Rights. Another provision of the Codes requires those to whom it applies to "support fundamental principles of human rights across all [of the Company's] Lines of Business and in each region of the world in which [the Company] operate[s]. ... [The Company] compl[ies] with employment laws in the markets where we operate." The Codes further require those to whom it applies to "get involved, contribute to charitable causes and help to build stronger relationships in the communities where [the Company] operates" and "[d]o your part to reduce the environmental impact of [the Company's] operations, in every community around the world where [the Company] does business." The Codes indicate that each person to whom the Codes apply "has a responsibility to uphold" the Codes, and compliance with the Codes' provisions "is a term and condition of employment with the Company." The Codes state that the Company "may take action against employees who violate" the Codes, "up to and including termination of employment. Where appropriate, [the Company] may also seek monetary damages and/or a court order prohibiting the employee from continuing to violate" the Codes. The Proposal, if implemented, would necessitate reconciling a revised compensation policy to the Codes. It is important for the Company to maintain managerial control over its workforce, which includes having control over the Codes. Accordingly, any determination regarding revision of the Codes is an ordinary business activity for the Company, as it is with all public companies.

Historically, the Staff has concurred with the omission of proposals that deal with a company's code of conduct or code of ethics under Rule 14a-8(i)(7). See, e.g., The Walt Disney Co., Verizon Communications Inc. and International Business Machines Corp. In NYNEX Corporation (Feb. 1, 1989), the Staff concurred with the omission of a proposal that sought to specify "the particular topics to be addressed in the Company's code of conduct" to be excludable. See also USX Corporation (Dec. 28, 1995) (concurring with the omission of a proposal seeking implementation of a Code of Ethics to establish a "pattern of fair play" in the dealings between the company and retired employees was excludable as relating to

MORRISON I FOERSTER


ordinary business because it dealt with "the terms of a corporate Code of Ethics"); and Barnett Banks, Inc. (Dec. 18, 1995) (concurring with the omission of a proposal as relating to ordinary business where it dealt with "the preparation and publication of a Code of Ethics"). See also Intel Corporation (Mar. 18, 1999) (concurring with the omission of a proposal requesting that the board implement an "Employee Bill of Rights" because it related to the company's ordinary business operations (i.e., management of the workforce)).

Proposals that concern only senior executive officer and director compensation may not be excluded under Rule 14a-8(i)(7) as they involve "significant social policy issues" that transcend day-to-day business matters, and are appropriate for a shareholder vote. See Staff Legal Bulletin No. l 4A (July 12, 2002). However, where a proposal purports to address executive compensation, the Staff allows exclusion of the proposal under Rule 14a-8(i)(7) where the thrust and focus of the proposal relates to a matter of ordinary business. For example, in Delta Air Lines, Inc. (Mar. 27, 2012), the Staff permitted exclusion of a proposal requesting that the board initiate a program that prohibits payment under any incentive program for management or executive officers unless there is an appropriate process to fund the retirement accounts of retired pilots. In permitting exclusion, the Staff noted that "although the proposal mentions executive compensation, the thrust and focus of the proposal is on the ordinary business matter of employee benefits." Similarly to Delta, the Proposal in this case is focused on the Company's general adherence to ethical business practices, an ordinary business matter. Accordingly, as the Proposal relates to the Company's general adherence to ethical business practices and policies, and if adopted, the Proposal likely would require consideration and implementation of changes to the terms of the Company's Codes, it relates to the Company's ordinary business operations. The Company is, therefore, of the view that it may properly omit the Proposal and Supporting Statement from the 2016 Proxy Materials pursuant to Rule 14a-8(i)(7).

MORRISON I FOERSTER


III. CONCLUSION

For the reasons discussed above, the Company believes that it may properly omit the Proposal and Supporting Statement from its 2016 Proxy Materials in reliance on Rule 14a-8. As such, we respectfully request that the Staff concur with the Company's view and not recommend enforcement action to the Commission if the Company omits the Proposal and Supporting Statement from its 2016 Proxy Materials. If we can be of further assistance in this matter, please do not hesitate to contact me at (202) 778-1611.

Sincerely,

Martin P. Dunn of MmTison & Foerster LLP

Attachments

cc: Jing Zhao Anthony Horan, Corporate Secretary, JPMorgan Chase & Co.

EXHIBIT A

Shareholder Proposal on Executive Compensation Philosophy

Resolved: shareholders recommend that JPMorgan Chase & Co. (the Firm) adopt a balanced executive compensation philosophy with social factors to improve the Firm's ethical conduct and

public reputation.

Supporting Statement

According to 2015 Proxy Statement, the Compensation & Management Development Committee ("CMDC") "assists the Board in its oversight of the Firm's compensation programs and reviews and approves the Firm's overall compensation philosophy and practices" (p.27). "The CMDC reviews and approves the Firm's compensation philosophy, which guides how the Firm's compensation plans and programs are designed for both the Operating Committee, ... " "The CMDC uses a disciplined pay-for-performance framework to make executive compensation decisions commensurate with Firm, line of business, and individual performance, while considering other relevant factors, including market practices" (p.38). As a result, for example, such a philosophy, without consideration of social factors, guided the CMDC to award our CEO a total compensation $27,701,709 in 2014, a 135% jump from 2013 (p.58).

Meanwhile, "[t]wo fifths of the population of developed countries have gained little over recent decades" (OECD Says Rise in Inequality Is Hmting Growth, Wall Street Journal May 22-24, 2015). Professor Thomas Piketty stated, "there is absolutely no doubt that the increase of inequality in the United States contributed to the nation's financial instability." (Capital in the Twenty-First Century. The Belknap Press of Harvard University Press, 2014. p.297) "Let me return now to the cause of rising inequality in the United States. The increase was largely the result of an unprecedented increase in wage inequality and in particular the emergence of extremely high remunerations at the summit of the wage hierarchy, particularly among top managers of large firms."(p.298) "[T]he financial professions are about twice as common in the very high income groups as in the economy overall." (p.303) "Because it is objectively difficult to measure individual contributions to a firm's output, top managers,found it relatively easy to persuade boards and stockholders that they were worth the money, especially since the members of compensation committees were often chosen in a rather incestuous manner." (p.510)

According to Senator Bernie Sanders: "Wall Street cannot continue to be an island unto itself, gambling trillions in risky financial instruments while expecting the public to bail it out." "The six largest financial institutions in this country today hold assets equal to about 60% of the nation's gross domestic product. These six banks issue more than two-thirds of all credit cards and over 35 percent of all mortgages. They control 95 percent of all derivatives and hold more than 40 percent of all bank deposits in the United States." "Our banking system must be part of the productive, job-creating productive economy." "If a bank is too big to fail, it is too big to exist. These institutions have acquired too much economic and political power, endangering our economy and our political process." (https://berniesanders.corn/issues/reforming-wall-street/)

For the purpose of this proposal, the Board or the CMDC has the flexibility to select social factors, such economic condition, unemployment and average income.

Rule 14a-8 - Proposals of Security Holders

This section addresses when a company must include a shareholder's proposal in its proxy statement and identify the proposal in its form of proxy when the company holds an annual or special meeting of shareholders. In summary, in order to have your shareholder proposal included on a company's proxy card, and included along with any supporting statement in its proxy statement, you must be eligible and follow certain procedures. Under a few specific circumstances, the company is permitted to exclude your proposal, but only after submitting its reasons to the Commission. We structured this section in a question-and-answer format so that it is easier to understand. The references to "you" are to a shareholder seeking to submit the proposal.

(a) Question 1: What is a proposal? A shareholder proposal is your recommendation or requirement that the company and/or its board of directors take action, which you intend to present at a meeting of the company's shareholders. Your proposal should state as clearly as possible the course of action that you believe the company should follow. If your proposal is placed on the company's proxy card, the company must also provide in the form of proxy means for shareholders to specify by boxes a choice between approval or disapproval, or abstention. Unless otherwise indicated, the word "proposal" as used in this section refers both to your proposal, and to your corresponding statement in support of your proposal (if any).

(b) Question 2: Who is eligible to submit a proposal, and how do I demonstrate to the company that I am eligible? (1) In order to be eligible to submit a proposal, you must have continuously

held at least $2,000 in market value, or 1%, of the company's securities entitled to be voted on the proposal at the meeting for at least one year by the date you submit the proposal. You must continue to hold those securities through the date of the meeting.

(2) If you are the registered holder of your securities, which means that your name appears in the company's records as a shareholder, the company can verify your eligibility on its own, although you will still have to provide the company with a written statement that you intend to continue to hold the securities through the date of the meeting of shareholders. However, if like many shareholders you are not a registered holder, the company likely does not know that you are a shareholder, or how many shares you own. In this case, at the time you submit your proposal, you must prove your eligibility to the company in one of two ways:

(i) The first way is to submit to the company a written statement from the "record" holder of your securities (usually a broker or bank) verifying that, at the time you submitted your proposal, you continuously held the securities for at least one year. You must also include your own written statement that you intend to continue to hold the securities through the date of the meeting of shareholders; or

(ii) The second way to prove ownership applies only if you have filed a Schedule 130, Schedule 13G, Form 3, Form 4 and/or Form 5, or amendments to those documents or updated forms, reflecting your ownership of the shares as of or before the date on which the one-year eligibility period begins. If you have filed one of these documents with the SEC, you may demonstrate your eligibility by submitting to the company:

(A) A copy of the schedule and/or form, and any subsequent amendments reporting a change in your ownership level;

(8) Your written statement that you continuously held the required number of shares for the one-year period as of the date of the statement; and

(C) Your written statement that you intend to continue ownership of the shares through the date of the company's annual or special meeting.

(c) Question 3: How many proposals may I submit? Each shareholder may submit no more than one proposal to a company for a particular shareholders' meeting.

(d) Question 4: How long can my proposal be? The proposal, including any accompanying supporting statement, may not exceed 500 words.

(e) Question 5: What is the deadline for submitting a proposal? (1) If you are submitting your proposal for the company's annual meeting,

you can in most cases find the deadline in last year's proxy statement. However, if the company did not hold an annual meeting last year, or has changed the date of its meeting for this year more than 30 days from last year's meeting, you can usually find the deadline in one of the company's quarterly reports on Form 10-Q, or in shareholder reports of investment companies under Rule 270.30d-1 of this chapter of the Investment Company Act of 1940. In order to avoid controversy, shareholders should submit their proposals by means, including electronic means, that permit them to prove the date of delivery.

(2) The deadline is calculated in the following manner if the proposal is submitted for a regularly scheduled annual meeting. The proposal must be received at the company's principal executive offices not less than 120 calendar days before the date of the company's proxy statement released to shareholders in connection with the previous year's annual meeting. However, if the company did not hold an annual meeting the previous year, or if the date of this year's annual meeting has been changed by more than 30 days from the date of the previous year's meeting, then the deadline is a reasonable time before the company begins to print and send its proxy materials.

(3) If you are submitting your proposal for a meeting of shareholders other than a regularly scheduled annual meeting, the deadline is a reasonable time before the company begins to print and send its proxy materials.

(f) Question 6: What if I fail to follow one of the eligibility or procedural requirements explained in answers to Questions 1 through 4 of this section? (1) The company may exclude your proposal, but only after it has notified you

of the problem, and you have failed adequately to correct it. Within 14 calendar days of receiving your proposal, the company must notify you in writing of any procedural or eligibility deficiencies, as well as of the time frame for your response. Your response must be postmarked, or transmitted electronically, no later than 14 days from the date you received the company's notification. A company need not provide you such notice of a deficiency if the deficiency cannot be remedied, such as if you fail to submit a proposal by the company's properly determined deadline. If the company intends to exclude the proposal, it will later have to make a submission under Rule 14a-8 and provide you with a copy under Question 10 below, Rule 14a-8G).

(2) If you fail in your promise to hold the required number of securities through the date of the meeting of shareholders, then the company will be permitted to exclude all of your proposals from its proxy materials for any meeting held in the following two calendar years.

(g) Question 7: Who has the burden of persuading the Commission or its staff that my proposal can be excluded? Except as otherwise noted, the burden is on the company to demonstrate that it is entitled to exclude a proposal.

(h) Question 8: Must I appear personally at the shareholders' meeting to present the proposal? (1) Either you, or your representative who is qualified under state law to

present the proposal on your behalf, must attend the meeting to present the proposal. Whether you attend the meeting yourself or send a qualified representative to the meeting in your place, you should make sure that you, or your representative, follow the proper state law procedures for attending the meeting and/or presenting your proposal.

(2) If the company holds it shareholder meeting in whole or in part via electronic media, and the company permits you or your representative to present your proposal via such media, then you may appear through electronic media rather than traveling to the meeting to appear in person.

(3) If you or your qualified representative fail to appear and present the proposal, without good cause, the company will be permitted to exclude all of your proposals from its proxy materials for any meetings held in the following two calendar years.

(i) Question 9: If I have complied with the procedural requirements, on what other bases may a company rely to exclude my proposal?

(1) Improper under state law: If the proposal is not a proper subject for action by shareholders under the laws of the jurisdiction of the company's organization;

Note to paragraph (i)(1): Depending on the subject matter, some proposals are not considered proper under state law if they would be binding on the company if approved by shareholders. In our experience, most proposals that are cast as recommendations or requests that the board of directors take specified action are proper under state law. Accordingly, we will assume that a proposal drafted as a recommendation or suggestion is proper unless the company demonstrates otherwise.

(2) Violation of law: If the proposal would, if implemented, cause the company to violate any state, federal, or foreign law to which it is subject;

Note to paragraph (i)(2): We will not apply this basis for exclusion to permit exclusion of a proposal on grounds that it would violate foreign law if compliance with the foreign law could result in a violation of any state or federal law.

(3) Violation of proxy rules: If the proposal or supporting statement is contrary to any of the Commission's proxy rules, including Rule 14a-9, which prohibits materially false or misleading statements in proxy soliciting materials;

(4) Personal grievance; special interest: If the proposal relates to the redress of a personal claim or grievance against the company or any other person, or if it is designed to result in a benefit to you, or to further a personal interest, which is not shared by the other shareholders at large;

(5) Relevance: If the proposal relates to operations which account for less than 5 percent of the company's total assets at the end of its most recent fiscal year, and for less than 5 percent of its net earning sand gross sales for its most recent fiscal year, and is not otherwise significantly related to the company's business;

(6) Absence of power/authority: If the company would lack the power or authority to implement the proposal;

(7) Management functions: If the proposal deals with a matter relating to the company's ordinary business operations;

(8) Relates to election: If the proposal:

(i) Would disqualify a nominee who is standing for election;

(ii) Would remove a director from office before his or her term expired;

(iii) Questions the competence business judgment, or character of one or more nominees or directors;

(iv) Seeks to include a specif c individual in the company's proxy materials for election to the oard of directors; or

(v) Otherwise could affect the outcome of the upcoming election of directors.

(9) Conflicts with company's proposal: If the proposal directly conflicts with one of the company's own propos Is to be submitted to shareholders at the same meeting.

(10)

(11)

(12)

Note to paragraph (i)(9): A com any's submission to the Commission under this section should specify th points of conflict with the company's proposal.

Substantially implemented: If the company has already substantially implemented the proposal;

Note to paragraph (i)(10): A c mpany may exclude a shareholder proposal that would provide an a visory vote or seek future advisory votes to approve the compensatio~ of executives as disclosed pursuant to Item 402 of Regulation S-K or ny successor to Item 402 (a "say-onpay vote") or that relates to the fre uency of say-on-pay votes, provided that in the most recent shareholdelvote required by Rule 240.14a-21 (b) of this chapter a single year (i.e. one, two, or three years) received approval of a majority of votes cas on the matter and the company has adopted a policy on the frequency

1 f say-on-pay votes that is consistent

with the choice of the majority of votes cast in the most recent shareholder vote required by rule 2 0.14a-21(b) of this chapter.

Duplication: If the proposal subs antially duplicates another proposal previously submitted to the compa y by another proponent that will be included in the company's proxy ma erials for the same meeting;

matter as another proposal or prop · sals that has or have been previously included in the company's proxy ma erials within the preceding 5 calendar years, a company may exclude it fr' m its proxy materials for any meeting held within 3 calendar years of the ltst time it was included if the proposal received:

(i) Less than 3% of the vote if reposed once within the preceding 5 calendar years;

(ii) Less than 6% of the vote on its last submission to shareholders if proposed twice previously within the preceding 5 calendar years; or

(iii) Less than 10% of the vote on its last submission to shareholders if proposed three times or more previously within the preceding 5 calendar years; and

(13) Specific amount of dividends: If the proposal relates to specific amounts of cash or stock dividends.

U) Question 10: What procedures must the company follow if it intends to exclude my proposal? (1) If the company intends to exclude a proposal from its proxy materials, it

must file its reasons with the Commission no later than 80 calendar days before it files its definitive proxy statement and form of proxy with the Commission. The company must simultaneously provide you with a copy of its submission. The Commission staff may permit the company to make its submission later than 80 days before the company files its definitive proxy statement and form of proxy, if the company demonstrates good cause for missing the deadline.

(2) The company must file six paper copies of the following:

(i) The proposal;

(ii) An explanation of why the company believes that it may exclude the proposal, which should, if possible, refer to the most recent applicable authority, such as prior Division letters issued under the rule; and

(iii) A supporting opinion of counsel when such reasons are based on matters of state or foreign law.

(k) Question 11: May I submit my own statement to the Commission responding to the company's arguments? Yes, you may submit a response, but it is not required. You should try to submit any response to us, with a copy to the company, as soon as possible after the company makes its submission. This way, the Commission staff will have time to consider fully your submission before it issues its response. You should submit six paper copies of your response.

(I) Question 12: If the company includes my shareholder proposal in its proxy materials, what information about me must it include along with the proposal itself? (1) The company's proxy statement must include your name and address, as

well as the number of the company's voting securities that you hold. However, instead of providing that information, the company may instead include a statement that it will provide the information to shareholders promptly upon receiving an oral or written request.

(2) The company is not responsible for the contents of your proposal or supporting statement.

(m) Question 13: What can I do if the company includes in its proxy statement reasons why it believes shareholders should not vote in favor of my proposal, and I disagree with some of its statements? (1) The company may elect to include in its proxy statement reasons why it

believes shareholders should vote against your proposal. The company is allowed to make arguments reflecting its own point of view, just as you may express your own point of view in your proposal's supporting statement.

(2) However, if you believe that the company's opposition to your proposal contains materially false or misleading statements that may violate our anti-fraud rule, Rule 14a-9, you should promptly send to the Commission staff and the company a letter explaining the reasons for your view, along with a copy of the company's statements opposing your proposal. To the extent possible, your letter should include specific factual information demonstrating the inaccuracy of the company's claims. Time permitting, you may wish to try to work out your differences with the company by yourself before contacting the Commission staff.

(3) We require the company to send you a copy of its statements opposing your proposal before it sends its proxy materials, so that you may bring to our attention any materially false or misleading statements, under the following timeframes:

(i) If our no-action response requires that you make revisions to your proposal or supporting statement as a condition to requiring the company to include it in its proxy materials, then the company must provide you with a copy of its opposition statements no later than 5 calendar days after the company receives a copy of your revised proposal; or

(ii) In all other cases, the company must provide you with a copy of its opposition statements no later than 30 calendar days before its files definitive copies of its proxy statement and form of proxy under Rule 14a-6.

Please see the attached shareholder proposal with my JPM shares letter to our 2016 meeting of shareholders. I also just sent to you via post mail.

Regards,

Jing Zhao

US-Japan-China Comparative Policy Research Institute

This communication is for informational purposes only. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. All market prices, data and other information are not warranted as to completeness or accuracy and are subject to change without notice. Any comments or statements made herein do not necessarily reflect those of JPMorgan Chase & Co., its subsidiaries and affiliates (collectively, "JPMC"). This transmission may contain information that is proprietary, privileged, confidential and/or exempt from disclosure under applicable law. If you are not the intended recipient, you are hereby notified that any disclosure, copying, distribution, or use of the information contained herein (including any reliance thereon) is STRICTLY PROHIBITED. If you received this transmission in error, please immediately contact the sender and destroy the material in its entirety, whether in electronic or hard copy format. Although this transmission and any attachments are believed to be free of any virus or other defect that might affect any computer system into which it is received and opened, it is the responsibility of the recipient to ensure that it is virus free and no responsibility is accepted by JPMC for any loss or damage arising in any way from its use. Please note that any electronic communication that is conducted within or through JPMC's systems is subject to interception, monitoring, review, retention and external production in accordance with JPMC's policy and local laws, rules and regulations; may be stored or otherwise processed in countries other than the country in which you are located; and will be treated in accordance with JPMC policies and applicable laws and regulations. Please refer to http://www.jpmorgan.com/pages/disclosures for disclosures relating to European legal entities.

2

Shareholder Proposal on Executive Compensation Philosophy

Resolved: shareholders recommend that JPMorgan Chase & Co. (the Firm) adopt an executive compensation philosophy with consideration of relevant social factors to improve the Firm's ethical

conduct and public reputation.

Supporting Statement

According to 2015 Proxy Statement, the Compensation & Management Development Committee (CMDC) "assists the Board in its oversight of the Firm's compensation programs and reviews and approves the Firm's overall compensation philosophy and practices" (p.27). "The CMDC reviews and approves the Firm's compensation philosophy, which guides how the Firm's compensation plans and programs are designed". "The CMDC uses a disciplined pay-for-performance framework to make executive compensation decisions ... , while considering other relevant factors, including market practices" (p.38). Such a philosophy without consideration of social factors guided the CMDC to award our CEO total compensation $27,701,709 in 2014, 135% increase from 2013 (p.58).

Meanwhile, according to Wall Street Journal: "Two fifths of the population of developed countries have gained little over recent decades" (OECD Says Rise in Inequality Is Hurting Growth, May 22-24, 2015). According to Thomas Piketty's study Capital in the Twenty-First Century (The Belknap Press of Harvard University Press, 2014), "there is absolutely no doubt that the increase of inequality in the United States contributed to the nation's financial instability." (p.297) "The increase was largely the result of an unprecedented increase in wage inequality and in particular the emergence of extremely high remunerations at the summit of the wage hierarchy, particularly among top managers of large firms."(p.298) "The financial professions are about twice as common in the very high income groups as in the economy overall." (p.303) "Because it is objectively difficult to measure individual contributions to a firm's output, top managers found it relatively easy to persuade boards and stockholders that they were worth the money, especially since the members of compensation committees were often chosen in a rather incestuous manner." (p.510)

Many Americans agree with Senator Bernie Sanders: "The six largest financial institutions in this country today hold assets equal to about 60% of the nation's gross domestic product. These six banks issue more than two-thirds of all credit cards and over 35 percent of all mortgages. They control 95 percent of all derivatives and hold more than 40 percent of all bank deposits in the United States." "These institutions have acquired too much economic and political power, endangering our economy and our political process." "Our banking system must be part of the productive, job-creating productive economy." (https://berniesanders.com/issues/reforming-wall-street/)

For the purpose of this proposal, the Board or the CMDC has the flexibility to select relevant social factors, such as economic condition, unemployment and average income.

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uriti

es p

rodu

cts

and

serv

ices

to a

glo

bal c

lient

bas

e. In

gen

eral

, the

Cor

pora

te &

Inve

stm

ent

Bank

’s cl

ient

s ca

n be

cat

egor

ized

as:

mul

tinat

iona

ls, c

orpo

ratio

ns, g

over

nmen

tal e

ntiti

es, c

entr

al b

anks

and

as

set m

anag

ers

(e.g

., pe

nsio

n an

d he

dge

fund

s, fa

mily

offi

ces)

. The

re w

ere

52,0

00 e

mpl

oyee

s in

the

Corp

orat

e &

Inve

stm

ent B

ank

as o

f Sep

tem

ber

30, 2

014.

Com

mer

cial

Ban

king

pro

vide

s cr

edit,

ban

king

and

trea

sury

ser

vice

s to

app

roxi

mat

ely

59,0

00 c

lient

s in

th

e Un

ited

Stat

es a

cros

s 11

9 ci

ties

in th

e Un

ited

Stat

es a

nd 1

3 m

ajor

inte

rnat

iona

l citi

es. I

ts c

lient

s in

clud

e m

id-s

ized

bus

ines

ses,

cor

pora

tions

, mun

icip

aliti

es, fi

nanc

ial i

nstit

utio

ns, n

onpr

ofit e

ntiti

es, a

nd re

al e

stat

e ow

ners

and

inve

stor

s. C

omm

erci

al B

anki

ng h

ad 7,

000

empl

oyee

s on

Sep

tem

ber

30, 2

014.

Asse

t Man

agem

ent s

erve

s bo

th in

divi

dual

s an

d in

stitu

tions

, inc

ludi

ng m

ore

than

3,0

00 fi

nanc

ial

inte

rmed

iari

es, 6

0% o

f the

larg

est p

ensi

on a

nd s

over

eign

fund

s, a

nd m

any

of th

e w

orld

’s w

ealth

iest

indi

vidu

als

and

fam

ilies

. By

man

agin

g m

oney

for

clie

nts,

we

help

indi

vidu

als

retir

e m

ore

com

fort

ably

, pen

sion

fund

s m

eet

thei

r ob

ligat

ions

, uni

vers

ities

rein

vest

in re

sear

ch a

nd fa

cilit

ies,

and

wea

lthy

fam

ilies

ens

ure

last

ing

lega

cies

. O

n Se

ptem

ber

30, 2

014,

ther

e w

ere

19,0

00 e

mpl

oyee

s in

Ass

et M

anag

emen

t.

1H

OW

WE

DO

BU

SIN

ESS

— T

HE

REP

ORT

We

are

plea

sed

to s

hare

“H

ow W

e Do

Bus

ines

s —

The

Rep

ort,”

whi

ch d

escr

ibes

how

we

do

busi

ness

, act

ions

we’

ve ta

ken

to a

ddre

ss re

cent

cha

lleng

es a

nd w

hat w

e’re

doi

ng to

impr

ove.

Th

is re

port

was

initi

ated

in re

spon

se to

a re

ques

t by

a sh

areh

olde

r gr

oup

led

by T

he S

iste

rs o

f Ch

arity

of S

aint

Eliz

abet

h.

The

repo

rt d

etai

ls th

e m

any

larg

e-sc

ale

effor

ts a

nd in

vest

men

ts w

e’ve

mad

e to

str

engt

hen

our

cont

rol e

nviro

nmen

t thr

ough

enh

ance

men

ts o

f our

infr

astr

uctu

re, t

echn

olog

y, o

pera

ting

stan

dard

s an

d go

vern

ance

. It a

lso

desc

ribes

our

com

mitm

ent t

o ou

r cus

tom

ers,

as

wel

l as

our r

elat

ions

hips

w

ith re

gula

tors

, sha

reho

lder

s an

d th

e co

mm

uniti

es in

whi

ch w

e liv

e an

d w

ork.

Per

haps

mos

t im

port

ant,

we

talk

abo

ut o

ur p

eopl

e an

d ou

r cul

ture

. We

desc

ribe

how

we’

ve re

-art

icul

ated

and

re

-em

phas

ized

our

cor

pora

te s

tand

ards

and

wha

t we’

re d

oing

to h

elp

ensu

re th

at o

ur e

mpl

oyee

s in

tern

aliz

e th

ese

valu

es a

nd fo

cus

on th

em e

very

day

. In

that

sen

se, t

he re

port

is a

com

pani

on

piec

e to

our

Bus

ines

s Pr

inci

ples

, whi

ch w

ere

publ

ishe

d ea

rlie

r th

is y

ear

(and

are

sum

mar

ized

in

this

repo

rt).

Thos

e Bu

sine

ss P

rinc

iple

s fo

cus

on e

xcep

tiona

l clie

nt s

ervi

ce; o

pera

tiona

l exc

el-

lenc

e; a

com

mitm

ent t

o in

tegr

ity, f

airn

ess

and

resp

onsi

bilit

y; a

nd c

ultiv

atio

n of

a g

reat

team

and

w

inni

ng c

ultu

re. T

hey

emph

asiz

e th

e im

port

ance

of b

eing

a g

ood

corp

orat

e ci

tizen

and

alw

ays

tryi

ng to

do

the

righ

t thi

ng.

Whi

le w

e’re

pro

ud o

f wha

t we

do to

ser

ve o

ur c

lient

s, c

ontr

ibut

e to

our

com

mun

ities

and

ear

n a

fair

retu

rn fo

r sh

areh

olde

rs, w

e al

so k

now

that

we

alw

ays

can

do b

ette

r. Ev

ery

com

pany

mak

es

mis

take

s (a

nd w

e’ve

mad

e a

num

ber

of th

em),

but t

he h

allm

ark

of a

gre

at c

ompa

ny is

wha

t it

does

in re

spon

se. W

e ar

e st

eadf

ast i

n ou

r co

mm

itmen

t to

lear

n fr

om th

e pa

st a

nd to

em

erge

as

an e

ven

bett

er c

ompa

ny. I

enc

oura

ge y

ou to

read

this

repo

rt to

lear

n m

ore

abou

t the

kin

d of

co

mpa

ny w

e ar

e an

d ho

w w

e’re

wor

king

har

d to

be

bett

er e

ach

day.

Jam

ie D

imon

Ch

airm

an a

nd C

hief

Exe

cutiv

e O

ffice

r

Dece

mbe

r 19

, 201

4

HO

W W

E D

O B

USI

NES

S —

TH

E R

EPO

RT2 TA

BLE

OF

CON

TEN

TS

I. In

trod

ucti

on

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.

3

Ackn

owle

dgin

g ou

r m

ista

kes

and

mov

ing

forw

ard

..

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..

.

5

Wha

t we

are

doin

g to

impr

ove

..

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6

II.

Our

cor

pora

te c

ultu

re

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.

7

Com

mun

icat

ing

our

corp

orat

e st

anda

rds

.

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.

10

Lead

ersh

ip a

nd g

over

nanc

e .

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15

Our

em

ploy

ee li

fe c

ycle

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19

III.

Our

con

trol

env

iron

men

t .

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25

Enha

ncin

g go

vern

ance

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28

Firs

t lin

e of

def

ense

..

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30

Cont

rol f

unct

ions

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40

Inte

rnal

Aud

it .

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57

IV.

Our

cus

tom

er c

omm

itm

ent

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59

Cons

umer

& C

omm

unity

Ban

king

.

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6

1

Corp

orat

e &

Inve

stm

ent B

ank

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6

5

Com

mer

cial

Ban

king

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8

Asse

t Man

agem

ent

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70

V.

Our

rel

atio

nshi

ps w

ith

regu

lato

rs, s

hare

hold

ers

and

com

mun

itie

s .

..

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73

Regu

lato

rs

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75

Shar

ehol

ders

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78

Com

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ities

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8

0

VI.

A co

ntin

uing

eff

ort

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8

3

VII.

Appe

ndix

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8

7

Our

Bus

ines

s Pr

inci

ples

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.

89

Link

s to

JPM

orga

n Ch

ase

info

rmat

ion

..

..

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.

95

Repo

rt g

over

nanc

e an

d pr

ojec

t tea

m

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.

96

I. I

NTR

OD

UCT

ION

HO

W W

E D

O B

USI

NES

S —

INTR

OD

UCT

ION

5

ACK

NO

WLE

DG

ING

OU

R M

ISTA

KES

A

ND

MO

VIN

G F

OR

WA

RD

Dur

ing

the

past

sev

eral

yea

rs, w

e ha

ve fa

ced

a se

ries

of

lega

l and

reg

ulat

ory

issu

es. S

ome

of th

ese

issu

es

aros

e fr

om m

ista

kes

uniq

uely

our

ow

n, s

ome

rela

te to

ac

tions

take

n at

firm

s w

e ac

quir

ed d

urin

g th

e fin

anci

al

cris

is a

nd o

ther

s co

ncer

n in

dust

ry-w

ide

prac

tices

. Th

ese

incl

ude

mor

tgag

e fo

recl

osur

e pr

oces

ses,

m

ortg

age-

back

ed s

ecur

ities

mat

ters

, Ant

i-Mon

ey

Laun

deri

ng A

ct c

ompl

ianc

e, th

e M

adoff

mat

ter

and

loss

es in

our

Chi

ef In

vest

men

t Offi

ce (C

IO) (

ofte

n re

ferr

ed to

as

the

Lond

on W

hale

inci

dent

), as

wel

l as

Asia

hir

ing

prac

tices

, LIB

OR

(Lon

don

Inte

rban

k O

ffere

d Ra

te) a

nd fo

reig

n ex

chan

ge m

atte

rs.

The

first

ste

p in

mov

ing

forw

ard

is a

ckno

wle

dgin

g ou

r m

ista

kes.

We

have

don

e th

at. I

n so

me

case

s, o

ur

cont

rols

fell

shor

t, an

d in

oth

ers,

we

sim

ply

wer

en’t

mee

ting

the

stan

dard

s w

e ha

d se

t for

our

selv

es. W

e kn

ow w

e ca

n do

bet

ter

and

are

com

mitt

ed to

doi

ng s

o.

In p

ursu

ing

this

cou

rse

of a

ctio

n, w

e ar

e re

com

mitt

ing

to th

e co

mpa

ny’s

cul

ture

— n

ot r

einv

entin

g it.

Muc

h of

w

hat w

e ar

e do

ing

is a

con

tinua

tion

and

stre

ngth

enin

g of

pro

gram

s al

read

y in

pla

ce. T

he c

hang

es w

e ar

e un

dert

akin

g ar

e pa

rt o

f a n

eces

sary

evo

lutio

n an

d w

ill

cont

inue

as

we

mai

ntai

n ou

r lo

ng-s

tand

ing

pled

ge to

se

rve

our

cust

omer

s, s

hare

hold

ers

and

com

mun

ities

in

both

goo

d tim

es a

nd b

ad.

INTR

OD

UCT

ION

JPM

orga

n Ch

ase

has

serv

ed it

s cu

stom

ers,

sha

re-

hold

ers

and

com

mun

ities

for

mor

e th

an 2

00 y

ears

. Si

nce

we

wer

e fo

unde

d, o

ur c

ompa

ny h

as b

een

guid

ed

by a

sim

ple

mis

sion

that

per

haps

was

bes

t art

icul

ated

by

J. P

ierp

ont M

orga

n, J

r., in

193

3, w

hen

he s

aid:

“I

sho

uld

stat

e th

at a

t all

times

the

idea

of d

oing

onl

y fir

st-c

lass

bus

ines

s, a

nd th

at in

a fi

rst-

clas

s w

ay, h

as

been

bef

ore

our

min

ds.”

The

purp

ose

of th

is re

port

is to

offe

r our

sha

reho

lder

s an

d ot

her i

nter

este

d pa

rtie

s a

view

into

how

we

are

striv

ing

to m

eet t

hat m

issi

on b

oth

for t

oday

and

for t

he

futu

re. S

peci

fical

ly, w

e su

mm

ariz

e on

the

follo

win

g pa

ges:

our

corp

orat

e cu

ltur

e, in

clud

ing

impr

ovin

g ou

r em

ploy

ees’

un

ders

tand

ing

of a

nd a

dher

ence

to o

ur c

orpo

rate

st

anda

rds

and

step

s w

e ha

ve ta

ken

to e

nhan

ce o

ur

corp

orat

e st

ruct

ure

so th

at o

ur c

ompa

ny’s

lead

ersh

ip

is b

ette

r po

sitio

ned

to u

phol

d, e

xem

plify

and

enf

orce

th

ose

stan

dard

s ac

ross

the

ente

rpri

se

cont

rol e

nvir

onm

ent,

whi

ch s

tart

s w

ith o

ur b

usi-

ness

es a

nd is

sup

port

ed b

y ou

r co

ntro

l fun

ctio

ns a

nd

Inte

rnal

Aud

it, a

nd th

e in

vest

men

ts w

e ha

ve m

ade

in

peop

le, p

olic

ies

and

tech

nolo

gy to

enh

ance

it

our

cust

omer

co

mm

itm

ent,

incl

udin

g off

erin

g th

e pr

oduc

ts a

nd

serv

ices

our

cus

tom

ers

need

, bet

ter

coor

dina

ting

and

stre

amlin

ing

our

chan

nels

, and

mak

ing

it ea

sier

fo

r pe

ople

to d

o bu

sine

ss w

ith u

s

our

rela

tion

ship

s w

ith

regu

lato

rs,

shar

ehol

ders

and

com

mun

itie

s th

roug

h, a

mon

g ot

her

mea

sure

s, in

crea

sed

tran

spar

ency

and

mor

e re

gula

r en

gage

men

t

HO

W W

E D

O B

USI

NES

S —

INTR

OD

UCT

ION

6 WH

AT W

E A

RE

DO

ING

TO

IMP

RO

VE

Give

n th

e sc

ale

of c

hang

e an

d th

e nu

mbe

r of c

halle

nges

ou

r com

pany

has

face

d in

the

past

sev

eral

yea

rs, w

e be

lieve

it is

use

ful t

o pr

ovid

e a

view

of h

ow w

e do

bus

ines

s an

d w

hat w

e ha

ve d

one

and

cont

inue

to d

o to

impr

ove.

*

Our

act

ions

hav

e be

en fa

r-re

achi

ng, d

raw

ing

on w

hat

we

have

lear

ned

from

our

mis

step

s. S

elf-

exam

inat

ion

is v

ery

muc

h a

part

of t

he fa

bric

of o

ur c

ompa

ny, a

nd

our

com

mitm

ent t

o in

tegr

ity, f

airn

ess

and

resp

onsi

bilit

y gi

ves

us th

e fo

rtitu

de to

sta

y th

e co

urse

in a

ddre

ssin

g ou

r ch

alle

nges

.

We

have

take

n gr

eat c

are

to re

-art

icul

ate

and

re-e

mph

asiz

e ou

r cu

ltura

l val

ues

and

corp

orat

e st

anda

rds

cons

iste

ntly

an

d cl

earl

y so

they

can

be

inte

rnal

ized

by

empl

oyee

s an

d re

sult

in th

e ki

nds

of o

bser

vabl

e, e

thic

al b

ehav

iors

th

at w

e ex

pect

. Hig

h st

anda

rds,

str

ong

valu

es a

nd a

co

mm

itmen

t to

doin

g fir

st-c

lass

bus

ines

s in

a fi

rst-

clas

s w

ay m

ust r

emai

n in

grai

ned

in o

ur c

ompa

ny’s

DN

A. W

e do

this

by

sett

ing

the

tone

from

the

top;

hir

ing

and

reta

inin

g gr

eat,

dive

rse

empl

oyee

s; tr

aini

ng o

ur p

eopl

e at

eac

h st

age

of th

eir

care

er; d

isci

plin

ing

empl

oyee

s fo

r do

ing

the

wro

ng th

ing;

bui

ldin

g te

amw

ork

and

mor

ale;

co

mm

unic

atin

g ho

nest

ly, c

lear

ly a

nd c

onsi

sten

tly; a

nd

stri

ving

to b

e go

od le

ader

s.

We

also

hav

e in

vest

ed a

n ex

trao

rdin

ary

amou

nt o

f mon

ey,

tech

nolo

gy a

nd fo

cus

on o

ur c

ontr

ol a

gend

a to

pro

vide

th

e ne

cess

ary

infr

astr

uctu

re a

nd s

uppo

rt. W

e ha

ve h

ired

thou

sand

s of

per

sonn

el, i

nves

ted

hund

reds

of m

illio

ns o

f do

llars

in n

ew te

chno

logy

, and

impl

emen

ted

trai

ning

and

ed

ucat

ion

prog

ram

s th

at h

ave

touc

hed

ever

y si

ngle

one

of

our

roug

hly

240,

000

peop

le w

orki

ng in

mor

e th

an 6

0 co

untr

ies

and

2,10

0 U.

S. c

ities

.

As w

ith e

very

thin

g w

e do

, one

of t

he m

ost i

mpo

rtan

t go

als

for

us th

roug

hout

has

bee

n to

enh

ance

the

cust

omer

exp

erie

nce.

We

have

sou

ght t

o st

ep b

ack,

re

view

our

pra

ctic

es a

nd ta

ke a

fres

h pe

rspe

ctiv

e on

ho

w w

e ar

e se

rvin

g ou

r cu

stom

ers.

In d

oing

so,

eac

h of

ou

r bu

sine

sses

has

iden

tified

are

as in

whi

ch w

e co

uld

be

doin

g be

tter

and

has

take

n st

eps

to im

prov

e.

The

serv

ice

we

prov

ide

our

cust

omer

s is

onl

y pa

rt o

f the

va

lue

our

com

pany

see

ks to

cre

ate.

As

a gl

obal

fina

ncia

l in

stitu

tion,

we

have

the

oppo

rtun

ity

and

oblig

atio

n to

co

ntri

bute

to a

wel

l-fun

ctio

ning

glo

bal fi

nanc

ial s

yste

m,

deliv

er a

fair

ret

urn

to o

ur s

hare

hold

ers,

and

mak

e a

posi

tive

cont

ribu

tion

to th

e pe

ople

and

inst

itutio

ns

that

we

serv

e. O

ver

the

past

sev

eral

yea

rs, w

e ha

ve

been

dili

gent

ly w

orki

ng to

bui

ld a

dee

per

and

sust

aine

d en

gage

men

t with

thes

e pa

rtie

s, in

clud

ing

our

regu

lato

rs,

shar

ehol

ders

and

com

mun

ities

.

Ove

rall,

the

scal

e of

the

effor

ts d

escr

ibed

in th

is re

port

is

com

men

sura

te w

ith th

e si

ze a

nd b

read

th o

f our

com

pany

, w

hich

allo

ws

us to

ach

ieve

impo

rtan

t thi

ngs

for

our

cust

omer

s an

d co

mm

uniti

es. I

n 20

13 a

lone

, we

wer

e ab

le to

pro

vide

cre

dit a

nd ra

ise

capi

tal o

f mor

e th

an $

2.1

trill

ion

for o

ur c

lient

s, p

rovi

de $

19 b

illio

n of

cre

dit t

o sm

all

busi

ness

es, l

aunc

h a

$250

mill

ion

wor

kfor

ce d

evel

opm

ent

initi

ativ

e an

d do

nate

ove

r $2

10 m

illio

n to

our

com

mu-

nitie

s. O

ur e

mpl

oyee

s —

incl

udin

g th

e m

ore

than

7,70

0 ve

tera

ns a

nd s

ervi

ce m

embe

rs w

e ha

ve h

ired

sinc

e 20

11

— h

ave

been

at t

he c

ente

r of

thes

e eff

orts

, wor

king

sid

e by

sid

e w

ith c

usto

mer

s an

d pa

rtic

ipat

ing

in o

ver

540,

000

hour

s of

vol

unte

er w

ork

spon

sore

d an

d/or

trac

ked

by th

e co

mpa

ny in

201

3.

* Th

is re

port

was

initi

ated

in re

spon

se to

a re

ques

t fro

m a

sha

reho

lder

gro

up

led

by T

he S

iste

rs o

f Cha

rity

of S

aint

Eliz

abet

h, a

mem

ber

of th

e In

terf

aith

Ce

nter

on

Corp

orat

e Re

spon

sibi

lity.

The

Sis

ters

of C

hari

ty a

sked

us

for

“com

preh

ensi

ve tr

ansp

aren

cy re

gard

ing

the

chal

leng

es fa

ced

by th

e ba

nk a

nd

cont

rols

put

in p

lace

to a

ddre

ss th

em.”

The

inte

rest

of T

he S

iste

rs o

f Cha

rity

re

flect

s th

eir

unde

rsta

ndin

g th

at la

rge

finan

cial

inst

itutio

ns h

ave

the

capa

city

to

affe

ct th

e liv

es a

nd li

velih

ood

of m

any

peop

le g

loba

lly. T

he re

port

was

pr

epar

ed u

nder

the

dire

ctio

n of

our

Ope

ratin

g Co

mm

ittee

and

the

Boar

d of

Di

rect

ors’

Cor

pora

te G

over

nanc

e &

Nom

inat

ing

Com

mitt

ee. S

ee th

e Ap

pend

ix

on p

age

96 fo

r a

listin

g of

mem

bers

II.

OU

R C

OR

PO

RAT

E CU

LTU

RE

HO

W W

E D

O B

USI

NES

S —

INTR

OD

UCT

ION

8

HO

W W

E D

O B

USI

NES

S —

OU

R C

OR

POR

ATE

CULT

UR

E9

OU

R C

OR

PO

RAT

E CU

LTU

RE

Corp

orat

e cu

lture

, whi

le o

ften

dis

cuss

ed, i

s di

fficu

lt to

de

fine.

To

us, c

ultu

re is

the

inte

rsec

tion

of o

ur c

orpo

rate

st

anda

rds

and

our e

mpl

oyee

s’ a

ctio

ns. T

hrou

gh o

ur

Busi

ness

Prin

cipl

es, C

ode

of C

ondu

ct a

nd C

ode

of E

thic

s fo

r Fin

ance

Pro

fess

iona

ls, w

e ha

ve fo

rmal

ized

cor

pora

te

stan

dard

s fo

r w

hich

all

of o

ur p

eopl

e ar

e he

ld a

ccou

nt-

able

. But

it is

not

eno

ugh

to h

ave

wel

l-art

icul

ated

st

anda

rds.

The

y m

ust b

e em

bedd

ed in

the

valu

es o

f ea

ch a

nd e

very

em

ploy

ee th

roug

h co

ntin

ued

trai

ning

an

d re

info

rcem

ent a

nd m

ust g

uide

and

be

evid

ent i

n ou

r ac

tions

.

Ove

r th

e pa

st fe

w y

ears

, we

have

und

erta

ken

a si

gnif-

ican

t effo

rt to

exa

min

e ho

w w

e ca

n m

ore

rigo

rous

ly

and

cons

iste

ntly

adh

ere

to th

e hi

gh e

thic

al s

tand

ards

ou

r sh

areh

olde

rs, r

egul

ator

s an

d ot

hers

exp

ect o

f us

and

that

we

have

for

ours

elve

s. T

hat i

nclu

des

sett

ing

and

clea

rly

artic

ulat

ing

busi

ness

pri

ncip

les,

ens

urin

g so

und

gove

rnan

ce a

nd th

e ri

ght t

one

from

the

top,

ha

ving

in p

lace

str

ong

lead

ersh

ip a

nd m

anag

emen

t pr

oces

ses,

and

pro

vidi

ng a

man

agem

ent d

evel

opm

ent

and

com

pens

atio

n fr

amew

ork

that

pro

perl

y in

cen-

tiviz

es a

ppro

pria

te b

ehav

iors

. Tak

en to

geth

er, t

hese

eff

orts

rep

rese

nt o

ur r

ecom

mitm

ent t

o th

e co

mpa

ny’s

cu

lture

and

refl

ect t

he lo

ng-t

erm

app

roac

h w

e ar

e ta

king

to e

nhan

ce it

.

As w

e co

ntin

ue o

ur w

ork,

we

have

focu

sed

our

atte

ntio

n on

thre

e ce

ntra

l obj

ectiv

es:

stan

dard

s to

our

ent

ire e

mpl

oyee

bas

e

so o

ur c

ompa

ny’s

lead

ersh

ip is

bet

ter

posi

tione

d to

up

hold

and

exe

mpl

ify th

ose

stan

dard

s ac

ross

the

ente

rpri

se

life

cycl

e, s

tart

ing

with

recr

uitin

g an

d hi

ring

and

ex

tend

ing

to tr

aini

ng, c

ompe

nsat

ing,

pro

mot

ing

and

disc

iplin

ing

our

empl

oyee

s

Whi

le w

e re

cent

ly h

ave

redo

uble

d an

d re

invi

gora

ted

our

wor

k ar

ound

cor

pora

te c

ultu

re, w

e kn

ow th

is c

an’t

be, a

nd c

erta

inly

don

’t th

ink

of it

as,

a o

ne-t

ime

effor

t. W

e re

cogn

ize

that

a s

ound

cor

pora

te c

ultu

re re

quire

s co

nsta

nt v

igila

nce

and

stea

dfas

t com

mitm

ent.

HO

W W

E D

O B

USI

NES

S —

OU

R C

OR

POR

ATE

CULT

UR

E10 CO

MM

UN

ICAT

ING

OU

R C

OR

PO

RAT

E ST

AN

DA

RD

S

Effec

tive

corp

orat

e st

anda

rds

mus

t be

clea

rly

artic

-ul

ated

and

fully

und

erst

ood

by e

very

per

son

at th

e co

mpa

ny. T

he B

oard

and

sen

ior

man

agem

ent h

ave

been

dee

ply

invo

lved

in c

omm

unic

atin

g ou

r co

rpor

ate

stan

dard

s: m

akin

g su

re th

at a

ll of

our

em

ploy

ees

arou

nd

the

wor

ld —

from

ban

k te

llers

to in

vest

men

t ban

kers

—

are

prov

ided

with

cle

ar a

nd c

onsi

sten

t pre

sent

atio

ns

of o

ur c

orpo

rate

sta

ndar

ds a

nd th

at e

mpl

oyee

s ha

ve

regu

lar

oppo

rtun

ities

and

requ

irem

ents

to re

fres

h th

eir

fam

iliar

ity w

ith th

ese

stan

dard

s.

Infu

sing

and

mai

ntai

ning

con

sist

ent c

orpo

rate

sta

ndar

ds

in a

larg

e, d

iver

se g

loba

l org

aniz

atio

n is

cha

lleng

ing,

but

w

e be

lieve

the

chal

leng

e ca

n be

met

by

proc

esse

s w

e us

e to

com

mun

icat

e ou

r bus

ines

s ob

ject

ives

, sta

rtin

g w

ith c

lear

and

repe

ated

com

mun

icat

ion

of k

ey m

essa

ges

deliv

ered

by

firm

wid

e m

anag

emen

t and

rein

forc

ed b

y lin

e of

bus

ines

s, fu

nctio

nal a

nd re

gion

al m

anag

emen

t. To

be

fully

effe

ctiv

e, m

essa

ges

also

mus

t be

coup

led

with

act

ions

that

dem

onst

rate

our

com

mitm

ent t

o ou

r co

rpor

ate

stan

dard

s —

our

Bus

ines

s Pr

inci

ples

, Cod

e of

Co

nduc

t and

Cod

e of

Eth

ics

for F

inan

ce P

rofe

ssio

nals

—

and

we

desc

ribe

thes

e fu

rthe

r bel

ow.

Our

Bus

ines

s Pr

inci

ples

The

com

pany

’s O

pera

ting

Com

mitt

ee la

unch

ed a

pro

ject

in

the

fall

of 2

013

unde

r th

e le

ader

ship

of o

ur C

hair

man

an

d Ch

ief E

xecu

tive

Offi

cer

(CEO

) and

a g

roup

of o

ur

seni

or e

xecu

tives

to re

-exa

min

e, re

new

our

com

mitm

ent

to a

nd c

omm

unic

ate

our

core

bus

ines

s pr

inci

ples

.

The

initi

al p

hase

of t

he p

roje

ct w

as le

d by

a p

air

of

seni

or e

xecu

tives

, bot

h w

ell-r

ecog

nize

d w

ithin

the

com

pany

as

cultu

re c

arri

ers.

The

y in

terv

iew

ed o

ther

m

embe

rs o

f sen

ior

man

agem

ent f

or th

eir

view

s on

the

com

pany

’s cu

lture

and

pos

sibl

e st

eps

to re

info

rce

it.

They

als

o le

d th

e de

velo

pmen

t of c

ase

stud

ies

of is

sues

w

e ha

ve fa

ced,

incl

udin

g m

ista

kes

mad

e an

d le

sson

s le

arne

d th

roug

h ou

r ex

peri

ence

s w

ith fo

reig

n co

rre-

spon

dent

ban

king

; pay

day

lend

ing

over

draf

ts; c

lient

se

lect

ion

and

asso

ciat

ed re

gula

tory

and

repu

tatio

n ri

sk;

the

impo

rtan

ce o

f bal

anci

ng ra

pid

busi

ness

gro

wth

with

st

rong

con

trol

s; a

nd p

olic

ies

and

proc

edur

es d

esig

ned

to a

chie

ve c

ompl

ianc

e w

ith th

e Se

rvic

emem

bers

Civ

il Re

lief A

ct.

The

case

stu

dies

wer

e sh

ared

and

dis

cuss

ed d

urin

g ou

r 20

14 a

nnua

l sen

ior

lead

ers’

mee

ting,

whi

ch is

hos

ted

by o

ur C

EO a

nd a

tten

ded

by a

ppro

xim

atel

y 20

0 of

our

se

nior

-mos

t em

ploy

ees,

and

wer

e fo

llow

ed b

y fir

mw

ide

disc

ussi

ons

led

by o

ur C

EO a

nd th

ese

seni

or le

ader

s.

The

seni

or le

ader

s’ m

eetin

g an

d fo

llow

-up

sess

ions

th

roug

hout

the

com

pany

als

o st

ress

ed th

e im

port

ance

of

com

pany

lead

ers

carr

ying

thes

e m

essa

ges

to th

eir

team

s so

em

ploy

ees

thro

ugho

ut th

e co

mpa

ny w

ould

un

ders

tand

thei

r im

port

ance

.

The

proj

ect’s

sec

ond

phas

e w

as th

e re

-art

icul

atio

n of

20

core

pri

ncip

les

— o

ur B

usin

ess

Prin

cipl

es —

repr

esen

ting

four

cen

tral

cor

pora

te te

nets

:

1.

Exce

ptio

nal c

lient

ser

vice

2.

Ope

ratio

nal e

xcel

lenc

e

3.

A co

mm

itmen

t to

inte

grity

, fai

rnes

s an

d re

spon

sibi

lity

4. A

gre

at te

am a

nd w

inni

ng c

ultu

re

See

the

full

set o

f Bus

ines

s Pr

inci

ples

on

the

next

pag

e an

d in

the

Appe

ndix

sta

rtin

g on

pag

e 89

.

Thes

e pr

inci

ples

then

wer

e pu

blis

hed

as a

boo

klet

tit

led

“How

We

Do B

usin

ess”

and

dis

trib

uted

to e

very

em

ploy

ee a

cros

s th

e co

mpa

ny, a

s w

ell a

s po

sted

pro

mi-

nent

ly o

n th

e co

mpa

ny’s

intr

anet

and

Inte

rnet

site

s.

We

belie

ve th

at th

e Bu

sine

ss P

rinc

iple

s ar

e ce

ntra

l to

our

succ

ess

as a

com

pany

, and

we

have

em

bedd

ed

them

into

all

stag

es o

f our

tale

nt p

roce

ss: r

ecru

iting

, on

boar

ding

, tra

inin

g an

d pe

rfor

man

ce m

anag

emen

t. In

di

ssem

inat

ing

the

book

let,

care

was

take

n to

em

phas

ize

that

thes

e pr

inci

ples

mus

t gui

de o

ur c

ompa

ny a

nd e

ach

empl

oyee

as

we

stri

ve to

be

the

com

pany

that

we,

our

cu

stom

ers

and

our

shar

ehol

ders

exp

ect u

s to

be.

COM

MU

NIC

ATIN

G O

UR

CO

RPO

RAT

E ST

AN

DA

RD

S

HO

W W

E D

O B

USI

NES

S —

OU

R C

OR

POR

ATE

CULT

UR

E11

Exce

ptio

nal c

lient

ser

vice

1.

Focu

s on

the

cust

omer

2.

Be fi

eld

and

clie

nt d

rive

n an

d op

erat

e at

the

loca

l lev

el

3.

Build

wor

ld-c

lass

fran

chis

es, i

nves

ting

for

the

long

term

, to

serv

e ou

r cl

ient

s

Ope

rati

onal

exc

elle

nce

4.

Set t

he h

ighe

st s

tand

ards

of p

erfo

rman

ce

5.

Dem

and

finan

cial

rig

or a

nd r

isk

disc

iplin

e: W

e w

ill a

lway

s m

aint

ain

a fo

rtre

ss b

alan

ce s

heet

6.

Stri

ve fo

r th

e be

st in

tern

al g

over

nanc

e an

d co

ntro

ls

7.

Act a

nd th

ink

like

owne

rs a

nd p

artn

ers

8.

Stri

ve to

bui

ld a

nd m

aint

ain

the

best

, mos

t effi

cien

t sys

tem

s an

d op

erat

ions

9.

Be d

isci

plin

ed in

eve

ryth

ing

we

do

10.

Exec

ute

with

bot

h sk

ill a

nd u

rgen

cy

A co

mm

itm

ent t

o in

tegr

ity,

fair

ness

and

res

pons

ibili

ty

11.

Do n

ot c

ompr

omis

e ou

r in

tegr

ity

12.

Face

fact

s

13.

Hav

e fo

rtitu

de

14.

Fost

er a

n en

viro

nmen

t of r

espe

ct, i

nclu

sive

ness

, hum

anity

and

hum

ility

15.

Hel

p st

reng

then

the

com

mun

ities

in w

hich

we

live

and

wor

k

A gr

eat t

eam

and

win

ning

cul

ture

16.

Hire

, tra

in a

nd re

tain

gre

at, d

iver

se e

mpl

oyee

s

17.

Build

team

wor

k, lo

yalty

and

mor

ale

18.

Mai

ntai

n an

ope

n, e

ntre

pren

euri

al m

erito

crac

y fo

r al

l

19.

Com

mun

icat

e ho

nest

ly, c

lear

ly a

nd c

onsi

sten

tly

20.

Stri

ve to

be

good

lead

ers

A m

ore

deta

iled

desc

ript

ion

of o

ur B

usin

ess

Prin

cipl

es c

an b

e fo

und

in th

e Ap

pend

ix s

tart

ing

on p

age

89.

The

JPM

orga

n Ch

ase

Busi

ness

Pri

ncip

les

HO

W W

E D

O B

USI

NES

S —

OU

R C

OR

POR

ATE

CULT

UR

E11

COM

MU

NIC

ATIN

G O

UR

CO

RPO

RAT

E ST

AN

DA

RD

SH

OW

WE

DO

BU

SIN

ESS

— O

UR

CO

RPO

RAT

E CU

LTU

RE

12 Agai

n, s

peci

al a

tten

tion

was

giv

en to

com

mun

icat

ing

with

man

ager

s at

all

leve

ls o

f the

com

pany

so

they

w

ould

und

erst

and

the

prin

cipl

es a

nd c

omm

unic

ate

them

to

and

rein

forc

e th

em w

ith th

eir

empl

oyee

s. T

o as

sist

in

that

effo

rt, o

ur p

rinc

iple

s w

ere

rolle

d ou

t acr

oss

the

glob

e: S

enio

r m

anag

emen

t ran

tow

n ha

lls in

our

ke

y lo

catio

ns, T

V m

onito

rs in

com

mon

are

as a

nd o

ur

inte

rnal

new

spap

er fr

eque

ntly

incl

ude

the

prin

cipl

es,

copi

es o

f the

pri

ncip

les

are

in o

ur w

aitin

g ro

oms

and

lobb

ies,

and

a to

olki

t was

dev

elop

ed to

ena

ble

exec

u-tiv

es to

eng

age

thei

r em

ploy

ees

in c

onve

rsat

ions

and

fo

llow

-up

teac

h-in

s on

how

we

do b

usin

ess,

cul

ture

, co

nduc

t and

con

trol

s.

We

now

are

in a

thir

d ph

ase

of th

e pr

ojec

t. In

this

pha

se,

we

pilo

ted

a cu

lture

and

con

duct

ris

k pr

ogra

m in

the

Euro

pe, M

iddl

e Ea

st a

nd A

fric

a (E

MEA

) reg

ion,

whi

ch

we

then

laun

ched

for

the

Corp

orat

e &

Inve

stm

ent B

ank

(CIB

) glo

bally

. The

pro

gram

focu

ses

on k

ey d

rive

rs o

f be

havi

or b

eyon

d ju

st c

ontr

ols

and

way

s w

e ac

tivel

y m

anag

e ou

r cu

lture

. Thi

s eff

ort h

as in

volv

ed h

eari

ng

from

focu

s gr

oups

wha

t we

do w

ell a

nd w

hat w

e co

uld

do b

ette

r. W

e re

cogn

ize

that

som

etim

es th

ere

can

be

gaps

bet

wee

n w

hat s

enio

r m

anag

emen

t thi

nks

and

wha

t ot

hers

in a

n or

gani

zatio

n th

ink

abou

t the

ir c

ompa

ny’s

cultu

re. A

s pa

rt o

f thi

s pr

oces

s, w

e al

so a

sked

som

e of

ou

r m

ore

juni

or e

mpl

oyee

s fo

r th

eir

inpu

t. Th

is e

ffort

w

ill in

volv

e an

ass

essm

ent o

f con

duct

ris

ks, m

itiga

tion

plan

s ac

ross

thos

e ri

sks,

met

rics

and

trai

ning

.

To h

ave

a gl

obal

ly c

onsi

sten

t fra

mew

ork

and

ensu

re

that

our

cor

pora

te s

tand

ards

are

bro

adly

and

dee

ply

inte

grat

ed w

ithin

and

acr

oss

busi

ness

es a

nd g

eogr

a-ph

ies,

we

are

wor

king

tow

ard

esta

blis

hing

and

impl

e-m

entin

g a

firm

wid

e ap

proa

ch to

cul

ture

and

con

duct

. Th

is g

loba

l effo

rt w

ill le

vera

ge w

hat w

e ha

ve le

arne

d fr

om th

e EM

EA a

nd C

IB p

ilots

and

ada

pt th

e fir

mw

ide

appr

oach

to e

ach

line

of b

usin

ess.

We

also

are

re

view

ing

othe

r lin

e of

bus

ines

s cu

lture

and

con

duct

in

itiat

ives

and

will

use

som

e of

thei

r be

st p

ract

ices

to

enha

nce

the

firm

wid

e ap

proa

ch.

Code

of C

ondu

ct

If ou

r Bu

sine

ss P

rinc

iple

s pr

ovid

e th

e ro

ad m

ap fo

r ho

w a

ll em

ploy

ees

at JP

Mor

gan

Chas

e ar

e ex

pect

ed to

be

have

in th

eir

wor

k, o

ur C

ode

of C

ondu

ct (t

he C

ode)

is

desi

gned

to p

rovi

de th

e di

rect

ion

for

esse

ntia

l ele

men

ts

of th

at m

ap. A

s su

ch, o

ur C

ode

is o

ur c

ore

cond

uct

polic

y do

cum

ent.

We

have

und

erta

ken

a m

ajor

effo

rt o

ver

the

past

sev

eral

ye

ars

to m

ake

each

em

ploy

ee fa

mili

ar w

ith a

nd a

ble

to

appl

y th

e Co

de to

his

or

her

wor

k. A

ll ne

w h

ires

mus

t co

mpl

ete

Code

trai

ning

sho

rtly

aft

er th

eir

star

t dat

e.

All e

mpl

oyee

s ar

e re

quire

d to

com

plet

e ad

ditio

nal C

ode

trai

ning

and

pro

vide

a n

ew a

ffirm

atio

n of

thei

r co

mpl

i-an

ce w

ith th

e Co

de a

nnua

lly.

We

subs

tant

ially

rede

sign

ed th

e Co

de in

201

2 to

mak

e it

mor

e ac

cess

ible

to e

mpl

oyee

s, in

clud

ing

a re

new

ed

focu

s on

pla

in la

ngua

ge a

nd a

mor

e in

vitin

g fo

rmat

. W

e gr

oupe

d pr

ovis

ions

of t

he C

ode,

whi

ch is

ava

ilabl

e

on o

ur w

ebsi

te, i

nto

five

maj

or th

emes

:

To e

mph

asiz

e th

e im

port

ance

of c

ompl

ianc

e w

ith th

e Co

de, w

e al

so h

ave

unde

rtak

en s

yste

ms

enha

ncem

ents

th

at a

re d

esig

ned

to m

axim

ize

awar

enes

s an

d un

der-

stan

ding

of t

he C

ode,

alo

ng w

ith to

ols

to e

nabl

e re

spon

-si

ble

whi

stle

blow

ing.

Toda

y, C

ode

spec

ialis

ts a

re a

ssig

ned

to e

very

one

of

our

lines

of b

usin

ess,

cor

pora

te fu

nctio

ns a

nd re

gion

s to

ass

ist e

mpl

oyee

s w

ith a

ny q

uest

ion

on th

e Co

de o

r re

late

d po

licie

s.

COM

MU

NIC

ATIN

G O

UR

CO

RPO

RAT

E ST

AN

DA

RD

S

HO

W W

E D

O B

USI

NES

S —

OU

R C

OR

POR

ATE

CULT

UR

E13

In a

dditi

on, w

e ha

ve u

nder

take

n a

num

ber

of s

teps

to

empo

wer

em

ploy

ees

to p

olic

e ad

here

nce

to o

ur C

ode.

W

e ha

ve m

ade

it ea

sier

for

empl

oyee

s to

repo

rt a

ny

know

n or

sus

pect

ed v

iola

tions

of t

he C

ode

via

the

Code

Re

port

ing

Hot

line

by p

hone

, web

, em

ail,

mai

l or

fax.

The

ho

tline

is a

nony

mou

s, e

xcep

t in

cert

ain

non-

U.S.

juri

s-di

ctio

ns w

here

law

s pr

ohib

it an

onym

ous

repo

rtin

g, a

nd

is a

vaila

ble

24/7

glo

bally

, with

tran

slat

ion

serv

ices

. It i

s m

aint

aine

d by

an

outs

ide

serv

ice

prov

ider

to e

nhan

ce

empl

oyee

con

fiden

tialit

y.

In s

uppo

rt o

f the

Cod

e, w

e m

aint

ain

coun

try-

spec

ific

w

hist

lebl

ower

pol

icie

s as

app

ropr

iate

, as

wel

l as

firm

wid

e hu

man

reso

urce

s po

licie

s aff

ordi

ng p

rote

c-tio

n fo

r the

goo

d fa

ith re

port

ing

of c

once

rns

rais

ed b

y em

ploy

ees.

We

also

pro

vide

trai

ning

to e

mpl

oyee

s in

ou

r Hum

an R

esou

rces

, Glo

bal I

nves

tigat

ions

and

Leg

al

depa

rtm

ents

rega

rdin

g th

e re

view

and

trea

tmen

t of

empl

oyee

-initi

ated

com

plai

nts,

incl

udin

g th

e pr

oper

es

cala

tion

of s

uspe

cted

or k

now

n vi

olat

ions

of t

he C

ode,

ot

her c

ompa

ny p

olic

y or

the

law

.

Code

of E

thic

s fo

r Fi

nanc

e Pr

ofes

sion

als

We

also

hav

e a

Code

of E

thic

s fo

r Fi

nanc

e Pr

ofes

sion

als

that

app

lies

to th

e CE

O, C

hief

Fin

anci

al O

ffice

r, Co

ntro

ller

and

all o

ther

pro

fess

iona

ls o

f the

com

pany

wor

ldw

ide

serv

ing

in a

fina

nce,

acc

ount

ing,

cor

pora

te tr

easu

ry,

tax

or in

vest

or re

latio

ns ro

le. T

he p

urpo

se o

f our

Cod

e of

Eth

ics

is to

pro

mot

e ho

nest

and

eth

ical

con

duct

and

co

mpl

ianc

e w

ith th

e la

w in

con

nect

ion

with

the

mai

nte-

nanc

e of

the

com

pany

’s fin

anci

al b

ooks

and

reco

rds

and

the

prep

arat

ion

of o

ur fi

nanc

ial s

tate

men

ts. E

mpl

oyee

s to

who

m th

e Co

de o

f Eth

ics

appl

ies

mus

t affi

rm

thei

r co

mpl

ianc

e w

ith th

e Co

de o

f Eth

ics

for

Fina

nce

Prof

essi

onal

s an

nual

ly w

hen

they

affi

rm c

ompl

ianc

e w

ith th

e Co

de o

f Con

duct

.

Mea

suri

ng s

ucce

ss

It is

our

goa

l to

even

mor

e de

eply

em

bed

our

corp

orat

e st

anda

rds

in o

ur d

aily

live

s. O

ne o

f the

way

s w

e in

tend

to

do

this

is th

roug

h th

e in

trod

uctio

n of

met

rics

to

mea

sure

our

per

form

ance

. The

se m

ay in

clud

e:

Clie

nt s

atis

fact

ion:

Res

earc

h cl

earl

y sh

ows

that

em

ploy

ees

who

feel

par

t of a

str

ong

wor

k cu

lture

“g

o th

e ex

tra

mile

” fo

r cl

ient

s. A

s su

ch, w

e ex

pect

im

prov

emen

ts in

our

em

ploy

ee c

ultu

re to

lead

to

mor

e sa

tisfie

d cl

ient

s.

Empl

oyee

sur

vey

resu

lts:

For

yea

rs, w

e ha

ve

cond

ucte

d em

ploy

ee s

urve

ys th

at in

clud

e qu

estio

ns

abou

t eth

ics

and

com

plia

nce.

With

this

yea

r’s s

urve

y,

we

bega

n be

nchm

arki

ng re

sults

on

thes

e to

pics

so

we

can

deve

lop

actio

n pl

ans

to a

ddre

ss o

ppor

tuni

ties

to s

tren

gthe

n cu

lture

whe

re th

e ne

ed a

rise

s.

Code

of C

ondu

ct is

sues

: We

incr

easi

ngly

trac

k is

sues

fo

und

thro

ugh

our

cont

rol p

roce

sses

rais

ed b

y em

ploy

ees

to th

eir

man

ager

s or

oth

ers

or re

port

ed

thro

ugh

our

Code

of C

ondu

ct h

otlin

e or

oth

er m

eans

.

Reg

ulat

ory

acti

ons:

Our

com

pany

’s pr

ogre

ss to

en

hanc

e ou

r cu

lture

will

be

mea

sure

d ag

ains

t the

go

al o

f red

ucin

g ad

vers

e re

gula

tory

eve

nts

so th

at

thos

e ev

ents

that

do

happ

en w

ill b

e re

cogn

ized

as

non-

syst

emic

bre

ache

s w

ithin

an

over

all s

tron

g co

ntro

l env

ironm

ent.

We

will

con

tinue

to re

info

rce

the

com

pany

’s cu

lture

an

d w

ill d

o so

for

the

bene

fit o

f our

clie

nts,

sha

reho

lder

s an

d co

mm

uniti

es.

COM

MU

NIC

ATIN

G O

UR

CO

RPO

RAT

E ST

AN

DA

RD

SH

OW

WE

DO

BU

SIN

ESS

— O

UR

CO

RPO

RAT

E CU

LTU

RE

14 Our

Inte

grity

Fir

st in

tran

et p

age

is e

asily

acc

essi

ble

to a

ll em

ploy

ees

from

a li

nk o

n th

e ho

me

page

of o

ur

inte

rnal

web

site

. It p

rovi

des

a w

ealth

of i

nfor

mat

ion

on

Case

stu

dy: I

nteg

rity

Fir

st

14H

OW

WE

DO

BU

SIN

ESS

— O

UR

CO

RPO

RAT

E CU

LTU

RE

how

to p

rote

ct th

e fir

m a

nd it

s re

puta

tion,

incl

udin

g po

licie

s, w

hist

lebl

owin

g an

d re

port

ing

of h

otlin

e co

ntac

ts, a

nd d

escr

iptio

ns o

f our

con

trol

func

tions

.

COM

MU

NIC

ATIN

G O

UR

CO

RPO

RAT

E ST

AN

DA

RD

S

HO

W W

E D

O B

USI

NES

S —

OU

R C

OR

POR

ATE

CULT

UR

E15

LEA

DER

SHIP

AN

D G

OV

ERN

AN

CE

Broa

dly

spea

king

, our

sen

ior

man

agem

ent t

eam

de

velo

ps th

e co

mpa

ny’s

stra

tegi

c di

rect

ion

and

over

sees

its

exe

cutio

n, w

hile

the

Boar

d is

cha

rged

with

pro

vidi

ng

effec

tive

over

sigh

t of m

anag

emen

t’s re

spon

sibi

litie

s.

Equa

lly im

port

ant,

the

Boar

d an

d th

e se

nior

man

age-

men

t tea

m a

re re

spon

sibl

e fo

r co

mm

unic

atin

g an

d en

forc

ing

the

com

pany

’s co

mm

itmen

t to

doin

g bu

sine

ss

in a

ccor

danc

e w

ith o

ur c

orpo

rate

sta

ndar

ds.

To fu

lfill

this

cor

e re

spon

sibi

lity,

it is

impe

rativ

e th

at o

ur

Boar

d an

d m

anag

emen

t tea

m b

e st

ruct

ured

and

ope

rate

in

a m

anne

r th

at is

fully

alig

ned

with

thes

e st

anda

rds.

Si

nce

the

finan

cial

cri

sis,

we

have

iden

tified

a n

umbe

r of

opp

ortu

nitie

s to

str

engt

hen

thos

e st

ruct

ures

, and

we

have

don

e so

.

Boar

d of

Dir

ecto

rs

A de

eply

eng

aged

Boa

rd o

f Dire

ctor

s is

vita

l to

our

com

pany

’s su

cces

s, a

nd o

ur d

irect

ors

brin

g a

stro

ng

com

bina

tion

of e

xper

ienc

e an

d ex

pert

ise

to th

eir

role

. O

ver

the

past

sev

eral

yea

rs, o

ur c

ompa

ny h

as lo

oked

at

way

s to

bui

ld u

pon

our

stro

ng fo

unda

tion

and

enha

nce

the

Boar

d’s

abili

ty to

hel

p le

ad o

ur c

ompa

ny fo

rwar

d.

Boar

d co

mpo

siti

on

Boar

d in

depe

nden

ce is

ess

entia

l to

effec

tive

gove

r-na

nce.

An

inde

pend

ent B

oard

ser

ves

the

inte

rest

s of

sha

reho

lder

s —

and

, in

the

case

of c

ompa

nies

like

ou

rs, t

he s

tabi

lity

of th

e fin

anci

al s

ervi

ces

syst

em —

by

effec

tivel

y ca

rryi

ng o

ut th

e fu

ndam

enta

l obl

igat

ion

of

over

sigh

t of m

anag

emen

t. Th

e Bo

ard

mus

t ass

ess

and

assi

st m

anag

emen

t by

aski

ng to

ugh

ques

tions

, mak

ing

or g

uidi

ng d

ifficu

lt de

cisi

ons

and

prov

idin

g an

effe

ctiv

e ch

alle

nge

to m

anag

emen

t on

an o

ngoi

ng b

asis

.

Our

gov

erna

nce

polic

ies

prov

ide

that

a s

ubst

an-

tial m

ajor

ity o

f our

Boa

rd w

ill b

e in

depe

nden

t, an

d,

curr

ently

, 10

of o

ur 1

1 Bo

ard

mem

bers

are

inde

pend

ent

unde

r th

e st

anda

rds

esta

blis

hed

by th

e N

ew Y

ork

Stoc

k Ex

chan

ge, a

s w

ell a

s ou

r ow

n in

tern

al s

tand

ards

.

In fu

rthe

ranc

e of

the

inde

pend

ence

of o

ur B

oard

, in

2013

, we

esta

blis

hed

the

Lead

Inde

pend

ent D

irect

or

role

. Our

Lea

d In

depe

nden

t Dire

ctor

is a

ppoi

nted

an

nual

ly b

y th

e in

depe

nden

t dire

ctor

s, a

nd th

e po

sitio

n in

clud

es th

e au

thor

ity a

nd re

spon

sibi

lity

to, a

mon

g ot

her

thin

gs, c

all a

Boa

rd m

eetin

g at

any

tim

e, a

ppro

ve

Boar

d m

eetin

g ag

enda

s, p

resi

de o

ver

exec

utiv

e se

ssio

ns

of in

depe

nden

t dire

ctor

s, a

nd g

uide

the

annu

al p

erfo

r-m

ance

eva

luat

ion

of th

e Ch

airm

an a

nd C

EO.

Our

Boa

rd a

lso

has

take

n st

eps

aim

ed a

t add

ress

ing

impo

rtan

t con

cern

s ra

ised

at o

ur a

nnua

l sha

reho

lder

m

eetin

g in

201

3. S

peci

fical

ly, a

num

ber

of s

hare

hold

ers

expr

esse

d a

desi

re fo

r th

e no

min

atio

n of

add

ition

al

dire

ctor

s w

ith e

xper

ienc

e in

ris

k m

anag

emen

t and

in

the

finan

cial

ser

vice

s in

dust

ry a

nd fo

r en

hanc

emen

ts to

ou

r co

rpor

ate

gove

rnan

ce p

ract

ices

. Tak

ing

into

acc

ount

th

at c

onst

ruct

ive

feed

back

, the

Boa

rd a

dded

, and

in M

ay

2014

sha

reho

lder

s el

ecte

d, tw

o ne

w B

oard

mem

bers

w

ith e

xper

ienc

e in

ris

k m

anag

emen

t and

the

finan

cial

se

rvic

es in

dust

ry.

Prac

tice

s an

d en

gage

men

t

In a

dditi

on to

the

chan

ges

desc

ribe

d ab

ove

unde

rsco

ring

th

e in

depe

nden

ce a

nd s

tren

gth

of th

e Bo

ard,

the

Boar

d co

ntin

ues

to c

onsi

der

and

impl

emen

t enh

ance

men

ts

to it

s ov

ersi

ght o

f man

agem

ent a

nd e

ngag

emen

t with

re

gula

tors

and

sha

reho

lder

s. It

has

form

aliz

ed a

num

ber

of im

prov

ed g

over

nanc

e pr

actic

es th

roug

h ch

ange

s to

th

e Bo

ard’

s Co

rpor

ate

Gove

rnan

ce P

rinc

iple

s, in

clud

ing

hold

ing

exec

utiv

e se

ssio

ns w

ithou

t com

pany

man

age-

men

t at e

very

regu

larl

y sc

hedu

led

Boar

d m

eetin

g an

d m

akin

g di

rect

ors

avai

labl

e, w

hen

appr

opri

ate,

for

cons

ulta

tion

with

maj

or s

hare

hold

ers

and

othe

r co

nstit

-ue

ncie

s. T

he B

oard

als

o ha

s en

dors

ed th

e Sh

areh

olde

r-

LEA

DER

SHIP

AN

D G

OV

ERN

AN

CEH

OW

WE

DO

BU

SIN

ESS

— O

UR

CO

RPO

RAT

E CU

LTU

RE

16 Dire

ctor

Exc

hang

e Pr

otoc

ol a

s a

guid

e fo

r eff

ectiv

e,

mut

ually

ben

efici

al e

ngag

emen

t bet

wee

n sh

areh

olde

rs

and

dire

ctor

s (s

ee p

age

78 fo

r m

ore

info

rmat

ion

abou

t th

e pr

otoc

ol).

In a

dditi

on, t

he B

oard

has

take

n m

eani

ngfu

l ste

ps to

se

e th

at re

gula

tory

obl

igat

ions

are

met

. Thi

s in

clud

es

esta

blis

hing

Spe

cific

Pur

pose

com

mitt

ees

to p

rovi

de

requ

ired

over

sigh

t in

conn

ectio

n w

ith c

erta

in re

gula

tory

or

ders

issu

ed b

y th

e Fe

dera

l Res

erve

and

the

Offi

ce o

f th

e Co

mpt

rolle

r of

the

Curr

ency

:

Com

plia

nce

Com

mitt

ee

Each

of t

hese

Spe

cific

Pur

pose

com

mitt

ees

has

betw

een

two

and

four

inde

pend

ent d

irect

ors.

The

y m

eet

regu

larl

y to

pro

vide

ove

rsig

ht o

f pro

gres

s ag

ains

t iss

ues

iden

tified

und

er th

e ap

plic

able

regu

lato

ry o

rder

.

In a

dditi

on to

thes

e co

mm

ittee

s, in

201

2, th

e Bo

ard

esta

blis

hed

a Re

view

Com

mitt

ee to

ove

rsee

an

inve

sti-

gatio

n by

the

com

pany

’s Ta

sk F

orce

and

to c

ondu

ct it

s ow

n re

view

of r

isk

man

agem

ent o

vers

ight

rela

ting

to th

e tr

adin

g lo

sses

in o

ur C

hief

Inve

stm

ent O

ffice

. In

Janu

ary

2013

, the

Rev

iew

Com

mitt

ee p

rodu

ced

its o

wn

repo

rt,

publ

ishe

d by

the

Boar

d, th

at in

clud

ed it

s fin

ding

s an

d re

com

men

datio

ns in

tend

ed to

str

engt

hen

the

com

pany

’s ov

eral

l ris

k m

anag

emen

t fun

ctio

n an

d Bo

ard

over

sigh

t of

that

func

tion.

Reco

mm

enda

tions

incl

uded

, am

ong

othe

r thi

ngs,

im

prov

ing

the

pres

enta

tion

of in

form

atio

n to

the

Boar

d of

Dire

ctor

s’ R

isk

Polic

y Co

mm

ittee

, cla

rifyi

ng th

e re

spec

-tiv

e ro

les

of th

at c

omm

ittee

and

the

Audi

t Com

mitt

ee,

enha

ncin

g th

e co

ntin

ued

inde

pend

ence

of t

he C

hief

Ris

k Offi

cer,

and

mak

ing

clea

r to

seni

or m

anag

emen

t tha

t the

pe

rfor

man

ce m

anag

emen

t pro

cess

tied

to c

ompe

nsat

ion

shou

ld in

clud

e an

ass

essm

ent o

f em

ploy

ees’

adh

eren

ce to

ap

plic

able

con

trol

sta

ndar

ds a

nd p

rom

otio

n of

com

pany

st

anda

rds.

The

com

pany

has

impl

emen

ted

and

cont

inue

s to

impl

emen

t the

com

mitt

ee’s

reco

mm

enda

tions

(cop

ies

of th

e Ta

sk F

orce

Rep

ort a

nd th

e Re

view

Com

mitt

ee

Repo

rt a

re a

vaila

ble

on o

ur w

ebsi

te).

The

Boar

d al

so u

nder

stan

ds th

e cr

itica

l rol

e it

play

s w

ith

resp

ect t

o th

e co

mpa

ny’s

cultu

re. T

he B

oard

has

bee

n en

gage

d w

ith m

anag

emen

t on

the

impo

rtan

ce o

f str

ong

corp

orat

e st

anda

rds,

wor

king

with

man

agem

ent t

o em

phas

ize

the

com

pany

’s co

mm

itmen

t to

doin

g th

ings

th

e ri

ght w

ay a

nd to

est

ablis

hing

a c

lear

and

com

mon

vo

cabu

lary

for

com

mun

icat

ing

this

com

mitm

ent.

Our d

irect

ors

enga

ge fr

eque

ntly

on

the

topi

c of

cul

ture

in

Boa

rd a

nd B

oard

com

mitt

ee m

eetin

gs, i

nclu

ding

in

the

Spec

ific

Purp

ose

com

mitt

ees,

in th

eir o

vers

ight

of

prog

ress

add

ress

ing

regu

lato

ry o

rder

issu

es. E

ngag

emen

t w

ork

also

incl

udes

the

Audi

t Com

mitt

ee’s

over

sigh

t of t

he

Code

of C

ondu

ct p

rogr

am, a

s w

ell a

s th

e Co

mpe

nsat

ion

& M

anag

emen

t Dev

elop

men

t Com

mitt

ee’s

revi

ew a

nd

appr

oval

of t

he c

ompa

ny’s

com

pens

atio

n an

d pe

rfor

-m

ance

man

agem

ent p

roce

ss. D

irect

ors

also

hig

hlig

ht

the

impo

rtan

ce o

f our

cor

pora

te s

tand

ards

thro

ugh

part

icip

atio

n in

less

form

al s

ettin

gs, s

uch

as to

wn

hall

and

othe

r mee

tings

hel

d by

the

lines

of b

usin

ess

and

othe

r fun

ctio

ns fo

r em

ploy

ees

and/

or le

ader

ship

team

s,

annu

al m

eetin

gs w

ith th

e co

mpa

ny’s

seni

or le

ader

s, a

nd

regu

larly

sch

edul

ed in

form

al s

essi

ons

with

mem

bers

of

the

Oper

atin

g Co

mm

ittee

and

oth

er s

enio

r lea

ders

.

LEA

DER

SHIP

AN

D G

OV

ERN

AN

CE

HO

W W

E D

O B

USI

NES

S —

OU

R C

OR

POR

ATE

CULT

UR

E17

Man

agem

ent

Our m

anag

emen

t str

uctu

re is

des

igne

d to

enh

ance

our

ab

ility

to le

ad th

e co

mpa

ny e

ffect

ivel

y as

a w

hole

, as

wel

l as

eac

h of

our

bus

ines

ses,

in a

man

ner t

hat p

rom

otes

a

stro

ng c

orpo

rate

cul

ture

and

is c

onsi

sten

t with

our

co

rpor

ate

stan

dard

s. W

e ha

ve fo

und

that

the

mos

t eff

ectiv

e ap

proa

ch is

to m

anag

e on

a li

ne o

f bus

ines

s ba

sis,

cou

pled

with

str

ong

corp

orat

e fu

nctio

ns a

nd

appr

opria

te g

over

nanc

e of

the

com

pany

’s su

bsid

iarie

s.

JPM

orga

n Ch

ase

is o

rgan

ized

into

four

prim

ary

lines

of

busi

ness

: Con

sum

er &

Com

mun

ity B

anki

ng, C

orpo

rate

&

Inve

stm

ent B

ank,

Com

mer

cial

Ban

king

and

Ass

et

Man

agem

ent.

In a

dditi

on, t

he C

orpo

rate

seg

men

t is

the

foca

l poi

nt fo

r set

ting

and

impl

emen

ting

stan

dard

s fo

r fin

anci

al m

anag

emen

t, ca

pita

l allo

catio

n, li

quid

ity, r

eso-

lutio

n pl

anni

ng, r

isk

man

agem

ent,

cont

rols

, reg

ulat

ory

mat

ters

, hum

an re

sour

ces

mat

ters

, tec

hnol

ogy,

and

lega

l an

d co

mpl

ianc

e.

The

man

agem

ent s

truc

ture

of e

ach

line

of b

usin

ess

mirr

ors

that

of t

he c

ompa

ny a

s a

who

le. E

ach

is le

d by

a

CEO

and

has

a Ch

ief F

inan

cial

Offi

cer,

Chie

f Ris

k Offi

cer,

Chie

f Com

plia

nce

Office

r, Ch

ief C

ontr

ol O

ffice

r, Ge

nera

l Co

unse

l, Hu

man

Res

ourc

es E

xecu

tive

and

Chie

f Aud

itor.

Each

line

of b

usin

ess

also

has

a M

anag

emen

t Com

mitt

ee,

a Ri

sk C

omm

ittee

and

a C

ontr

ol C

omm

ittee

.

LEA

DER

SHIP

AN

D G

OV

ERN

AN

CE

Not

e: N

ot a

ll di

rect

repo

rts

to Ja

mie

Dim

on a

re s

how

n; d

irect

repo

rts

to li

ne o

f bus

ines

s CE

Os

incl

ude

busi

ness

and

regi

onal

hea

ds o

nly

Ashl

ey B

acon

Chie

f Ris

k Offi

cer

22 y

ears

at J

PMor

gan

Chas

e22

in in

dust

ry

Stev

e Cu

tler

Gene

ral C

ouns

el

8 ye

ars

at JP

Mor

gan

Chas

e14

in in

dust

ry

John

Don

nelly

Head

of H

uman

Reso

urce

s 6

year

s at

JPM

orga

n Ch

ase

36 in

indu

stry

Mar

iann

e La

ke

Chie

f Fin

anci

al O

ffice

r 15

yea

rs a

t JPM

orga

n Ch

ase

23 in

indu

stry

Mat

t Zam

es

Chie

f Ope

ratin

g Offi

cer

10 y

ears

at J

PMor

gan

Chas

e22

in in

dust

ry

Jam

ie D

imon

Chai

rman

and

Chi

ef E

xecu

tive

Office

r

6 di

rect

rep

orts

Aver

age

indu

stry

exp

erie

nce

~26

year

sAv

erag

e ye

ars

at th

e co

mpa

ny

~1

4 ye

ars

1-

9

10-1

9

20+

Tenu

re a

t JPM

orga

n Ch

ase

(yea

rs)

2

3

1

Gord

on S

mith

Chie

f Exe

cutiv

e Offi

cer,

Co

nsum

er &

Com

mun

ity B

anki

ng8

year

s at

JPM

orga

n Ch

ase

33 in

indu

stry

7 di

rect

rep

orts

Aver

age

indu

stry

exp

erie

nce

~2

9 ye

ars

Aver

age

year

s at

the

com

pany

~2

2 ye

ars

1-

9

10-1

9

20+

Tenu

re a

t JPM

orga

n Ch

ase

(yea

rs)

Dou

g Pe

tno

Chie

f Exe

cutiv

e Offi

cer,

Co

mm

erci

al B

anki

ng25

yea

rs a

t JPM

orga

n Ch

ase

25 in

indu

stry

11

5

15 d

irec

t rep

orts

Aver

age

indu

stry

exp

erie

nce

~2

5 ye

ars

Aver

age

year

s at

the

com

pany

~16

year

s

1-

9

10-1

9

20+

Tenu

re a

t JPM

orga

n Ch

ase

(yea

rs)

Dan

iel P

into

Chie

f Exe

cutiv

e Offi

cer,

Co

rpor

ate

& In

vest

men

t Ban

k31

yea

rs a

t JPM

orga

n Ch

ase

31 in

indu

stry

4

5

6

4 di

rect

rep

orts

Aver

age

indu

stry

exp

erie

nce

~2

3 ye

ars

Aver

age

year

s at

the

com

pany

~19

year

s

1-

9

10-1

9

20+

Tenu

re a

t JPM

orga

n Ch

ase

(yea

rs)

Mar

y Er

does

Chie

f Exe

cutiv

e Offi

cer,

As

set M

anag

emen

t19

yea

rs a

t JPM

orga

n Ch

ase

25 in

indu

stry

12

1

Ope

rati

ng C

omm

itte

e st

ruct

ure

HO

W W

E D

O B

USI

NES

S —

OU

R C

OR

POR

ATE

CULT

UR

E18 Th

e lin

e of

bus

ines

s CE

Os s

it on

the

com

pany

’s Op

erat

ing

Com

mitt

ee, t

he c

ompa

ny’s

mos

t sen

ior m

anag

emen

t bo

dy, w

hich

als

o in

clud

es o

ur C

hairm

an a

nd C

EO, C

hief

Op

erat

ing

Office

r, Ch

ief F

inan

cial

Offi

cer,

Chie

f Ris

k Offi

cer,

Gene

ral C

ouns

el a

nd h

ead

of H

uman

Res

ourc

es.

The

Oper

atin

g Co

mm

ittee

is re

spon

sibl

e fo

r the

ove

rall

man

agem

ent o

f the

com

pany

, inc

ludi

ng d

evel

opin

g an

d im

plem

entin

g co

rpor

ate

stra

tegy

and

man

agin

g th

e co

mpa

ny’s

oper

atio

ns.

The

prev

ious

pag

e in

clud

es a

sch

emat

ic re

flect

ing

the

Ope

ratin

g Co

mm

ittee

str

uctu

re.

Each

line

of b

usin

ess

has

full

resp

onsi

bilit

y fo

r al

l as

pect

s of

its

busi

ness

, inc

ludi

ng fo

rmul

atio

n of

st

rate

gy, m

anag

emen

t of a

lloca

ted

capi

tal,

finan

cial

re

port

ing,

hum

an re

sour

ces,

ris

k, c

ontr

ol a

nd a

dher

ence

to

cor

pora

te s

tand

ards

. The

line

of b

usin

ess

CEO

s re

view

th

eir

resp

ectiv

e bu

sine

sses

with

the

Boar

d of

Dire

ctor

s,

esta

blis

h pr

iori

ties

for

each

yea

r, an

d re

port

per

iodi

cally

on

bus

ines

s re

sults

, ris

k m

atte

rs a

nd c

ontr

ol is

sues

.

In a

dditi

on to

our

line

s of

bus

ines

s go

vern

ance

str

uc-

ture

s, e

ach

of o

ur le

gal e

ntiti

es h

as a

Boa

rd o

f Dire

ctor

s an

d a

man

agem

ent t

eam

, gen

eral

ly d

raw

n fr

om th

e lin

es o

f bus

ines

s or

cor

pora

te fu

nctio

ns p

rinc

ipal

ly

resp

onsi

ble

for

such

ent

ity. F

or e

xam

ple,

som

e of

ou

r na

tiona

l ban

k su

bsid

iari

es, i

nclu

ding

JPM

orga

n Ch

ase

Bank

, N.A

., ha

ve th

eir

own

sepa

rate

Boa

rd a

nd

Ope

ratin

g Co

mm

ittee

.

Furt

herm

ore,

in S

epte

mbe

r 20

14, t

he O

ffice

of t

he

Com

ptro

ller

of th

e Cu

rren

cy fi

naliz

ed H

eigh

tene

d St

anda

rds

for

natio

nal b

anks

, whi

ch s

et m

inim

um

stan

dard

s fo

r th

e de

sign

and

impl

emen

tatio

n of

a r

isk

gove

rnan

ce fr

amew

ork

that

is o

vers

een

by a

ban

k’s

Boar

d of

dire

ctor

s. W

e ar

e ut

ilizi

ng th

e fir

mw

ide

busi

ness

, ris

k an

d co

ntro

l fra

mew

orks

to th

e ex

tent

po

ssib

le to

mee

t the

se s

tand

ards

, whi

le re

cogn

izin

g ou

r di

stin

ct re

spon

sibi

lity

to m

aint

ain

the

safe

ty a

nd

soun

dnes

s of

JPM

orga

n Ch

ase

Bank

, N.A

., an

d th

e sa

nctit

y of

its

char

ter.

LEA

DER

SHIP

AN

D G

OV

ERN

AN

CE

HO

W W

E D

O B

USI

NES

S —

OU

R C

OR

POR

ATE

CULT

UR

E19

In 2

013

, glo

bally

, 48%

of o

ur n

ew

hire

s w

ere

wom

en, a

nd in

the

Uni

ted

Stat

es, 5

5% o

f our

hir

es w

ere

raci

ally

or e

thni

cally

div

erse

.

OU

R E

MP

LOY

EE L

IFE

CYCL

E

Our

em

ploy

ees

are

the

livin

g, b

reat

hing

em

bodi

men

t of

our

cultu

re. A

ccor

ding

ly, w

e se

ek to

alig

n al

l pha

ses

of

the

empl

oyee

life

cyc

le —

recr

uitin

g, o

nboa

rdin

g, c

aree

r de

velo

pmen

t and

trai

ning

, per

form

ance

eva

luat

ions

, co

mpe

nsat

ion

and

prom

otio

n —

with

our

cor

pora

te

stan

dard

s. O

ver

the

last

sev

eral

yea

rs, w

e ha

ve fo

cuse

d pa

rtic

ular

att

entio

n on

recr

uitm

ent a

nd tr

aini

ng a

t all

leve

ls w

ithin

the

com

pany

, enh

anci

ng o

ur e

ffort

s to

de

velo

p ou

r fu

ture

lead

ers,

dev

elop

ing

succ

essi

on p

lans

to

ena

ble

our

com

pany

to c

ontin

ue o

pera

ting

in a

ccor

-da

nce

with

its

stan

dard

s an

d pr

inci

ples

ove

r th

e lo

ng

term

, and

inst

itutin

g pe

rfor

man

ce m

anag

emen

t and

co

mpe

nsat

ion

prac

tices

that

bet

ter

alig

n co

mpe

nsat

ion

with

our

com

mitm

ent t

o do

ing

busi

ness

the

righ

t way

.

Recr

uitm

ent

We

hire

thou

sand

s of

em

ploy

ees

each

yea

r ac

ross

all

our

glob

al b

usin

esse

s, a

nd w

e tr

ain

them

to u

nder

-st

and

our

cultu

re, p

rodu

cts,

reg

ulat

ory

requ

irem

ents

, se

rvic

es a

nd c

usto

mer

s, a

s w

ell a

s on

wha

t the

y ne

ed

to k

now

to d

o th

eir

jobs

wel

l. Th

e hi

ring

of t

he h

igh-

est-

qual

ity p

eopl

e is

ess

entia

l to

the

ongo

ing

succ

ess

of th

e co

mpa

ny. I

t als

o is

impo

rtan

t tha

t we

have

a

broa

dly

dive

rse

team

at a

ll le

vels

of t

he c

ompa

ny.

Tow

ard

that

end

, we

have

des

igne

d a

Blue

prin

t for

M

anag

ers

on D

iver

sity

that

enc

oura

ges

man

ager

s at

all

leve

ls to

mak

e di

vers

ity a

bus

ines

s pr

iori

ty,

expa

nd th

eir

scop

e in

sou

rcin

g an

d at

trac

ting

tale

nt,

crea

te a

mor

e in

clus

ive

wor

k en

viro

nmen

t to

empo

wer

em

ploy

ees,

and

fost

er a

wor

kpla

ce th

at is

res

pect

ful

and

incl

usiv

e of

diff

eren

ces.

Our

hir

ing

prac

tices

are

bas

ed o

n th

e fo

llow

ing

set o

f st

anda

rds

that

hel

p us

mai

ntai

n hi

gh le

vels

of i

nteg

rity

du

ring

the

proc

ess

and

base

em

ploy

men

t dec

isio

ns o

n m

erit

and

alig

nmen

t with

our

Bus

ines

s Pr

inci

ples

:

and

outs

ide

the

com

pany

.

-ua

ls, a

t all

leve

ls o

f the

com

pany

, who

em

body

the

com

pany

’s cu

lture

and

val

ues.

-da

tes

to p

ut th

e ri

ght p

eopl

e in

the

righ

t job

s.

Give

n th

e sc

ope

and

geog

raph

ic d

iver

sity

of o

ur b

usi-

ness

es, i

t is

impo

rtan

t tha

t we

mai

ntai

n pr

oces

ses

that

ev

alua

te c

andi

date

s co

nsis

tent

ly u

sing

obj

ectiv

e cr

iteri

a th

at w

eigh

onl

y ap

prop

riat

e co

nsid

erat

ions

. Tha

t con

sis-

tenc

y is

vita

l bec

ause

we

belie

ve th

at th

e hi

ring

pro

cess

is

the

first

ste

p to

cul

tivat

ing

a so

und

corp

orat

e cu

lture

.

Trai

ning

Onc

e em

ploy

ees

join

the

com

pany

, it’s

our

resp

onsi

bilit

y to

hel

p th

em b

uild

thei

r kn

owle

dge,

ski

lls a

nd e

xper

i-en

ce. A

mor

e en

gage

d an

d be

tter

trai

ned

wor

kfor

ce

not o

nly

incr

ease

s em

ploy

ee s

atis

fact

ion,

it c

ontr

ibut

es

to a

bet

ter

cust

omer

exp

erie

nce

and

help

s dr

ive

the

com

pany

’s lo

ng-t

erm

suc

cess

. The

com

pany

spe

nds

an e

stim

ated

$30

0 m

illio

n pe

r ye

ar g

loba

lly o

n fo

rmal

tr

aini

ng p

rogr

ams

at a

ll le

vels

. Pro

gram

s ra

nge

from

en

try-

leve

l tra

inin

g to

lead

ersh

ip a

nd m

anag

emen

t co

urse

s an

d ar

e ta

ilore

d to

indi

vidu

al fu

nctio

ns, l

ines

of

busi

ness

or

geog

raph

ic re

gion

s. W

e ha

ve c

ompr

ehen

sive

pr

ogra

ms

focu

sed

on o

ur re

gula

tory

con

trol

and

com

pli-

ance

obj

ectiv

es.

OU

R E

MPL

OYE

E LI

FE C

YCLE

HO

W W

E D

O B

USI

NES

S —

OU

R C

OR

POR

ATE

CULT

UR

E20 Si

nce

a si

gnifi

cant

am

ount

of e

ntry

-leve

l hir

ing

is d

one

at th

e an

alys

t and

ass

ocia

te le

vels

, we

spen

d a

sign

ifi-

cant

am

ount

of t

ime

trai

ning

thes

e em

ploy

ees

on h

ow

we

do b

usin

ess

and

help

ing

them

bui

ld th

e te

chni

cal

expe

rtis

e th

ey w

ill n

eed

for

thei

r jo

bs. T

o pu

t thi

s in

co

ntex

t, la

st y

ear:

mor

e th

an 5

00 fu

ll-tim

e an

alys

ts a

nd a

ssoc

iate

s an

d ov

er 8

00 s

umm

er a

naly

sts

and

asso

ciat

es.

Ope

ratio

ns, F

inan

ce a

nd H

uman

Res

ourc

es h

ired

and

trai

ned

over

700

full-

time

anal

ysts

.

anal

ysts

, ass

ocia

tes

and

sum

mer

ana

lyst

s.

and

sum

mer

ana

lyst

s.

mor

e th

an 1

60 fu

ll-tim

e an

d su

mm

er a

naly

sts

and

asso

ciat

es.

It al

so is

impo

rtan

t to

deve

lop

a st

rong

team

of

dedi

cate

d, ta

lent

ed a

nd c

omm

itted

lead

ers

thro

ugho

ut

all l

evel

s of

man

agem

ent.

At th

e to

p of

our

org

ani-

zatio

n, w

e w

ork

to d

evel

op a

pip

elin

e of

qua

lified

le

ader

s th

roug

h ex

pans

ive

trai

ning

and

dev

elop

men

t pr

ogra

ms,

bol

ster

ed b

y a

disc

iplin

ed p

roce

ss o

f tal

ent

revi

ews

focu

sed

on th

orou

gh a

sses

smen

ts, e

xecu

tive

deve

lopm

ent p

rogr

ams

and

rota

tions

of t

op e

xecu

tives

to

pre

pare

them

for

grea

ter

resp

onsi

bilit

y. W

e ha

ve a

nu

mbe

r of

leve

ls o

f man

agem

ent t

rain

ing

desi

gned

to

prep

are

empl

oyee

s fo

r m

anag

emen

t rol

es a

nd le

ader

-sh

ip re

spon

sibi

litie

s. A

mon

g th

em:

CEO

Boo

tcam

p tr

ains

our

sen

ior

lead

ers

on b

oth

inte

rnal

cha

lleng

es a

nd e

xter

nal p

ress

ures

that

face

a

CEO

or

head

of a

larg

e bu

sine

ss u

nit f

unct

ion.

Lead

ers

Mor

gan

Chas

e is

ano

ther

sen

ior

lead

er

prog

ram

that

is d

esig

ned

to d

evel

op c

erta

in le

ad-

ersh

ip o

bjec

tives

, inc

ludi

ng d

evel

opin

g st

rate

gies

an

d pe

rspe

ctiv

es fr

om a

ll bu

sine

sses

and

taki

ng a

fir

mw

ide

pers

pect

ive

in d

ecis

ion

mak

ing.

Lead

ing

Acr

oss

the

Fran

chis

e is

a tr

aini

ng p

rogr

am

for

the

next

leve

l of l

eade

rs th

at is

mod

eled

aft

er,

and

teac

hes

sim

ilar

topi

cs to

, Lea

ders

Mor

gan

Chas

e.

Trai

ning

the

Nex

t 40

,00

0 M

anag

ers

is a

glo

bal e

ffort

cu

rren

tly u

nder

way

to d

evel

op a

firm

wid

e ap

proa

ch

to tr

aini

ng th

e ne

xt s

et o

f mor

e th

an 4

0,00

0 m

anag

ers.

Our

lead

ersh

ip a

nd d

evel

opm

ent e

xecu

-tiv

es fr

om a

roun

d th

e w

orld

are

bri

ngin

g to

geth

er

thei

r be

st p

ract

ices

to d

evel

op a

sta

te-o

f-the

-art

pr

ogra

m th

at is

foun

ded

on o

ur B

usin

ess

Prin

cipl

es

and

lead

ersh

ip a

ttri

bute

s.

Thro

ugh

all o

f our

man

agem

ent t

rain

ing

prog

ram

s, w

e ai

m to

bui

ld a

str

ong

cultu

re o

f doi

ng th

e ri

ght t

hing

and

do

ing

first

-cla

ss b

usin

ess

in a

firs

t-cl

ass

way

.

OU

R E

MPL

OYE

E LI

FE C

YCLE

HO

W W

E D

O B

USI

NES

S —

OU

R C

OR

POR

ATE

CULT

UR

E21

Perf

orm

ance

man

agem

ent a

nd

prom

otio

n

Regu

lar f

eedb

ack

is c

ritic

al to

our

em

ploy

ees’

suc

cess

. Ou

r gui

ding

prin

cipl

es fo

r per

form

ance

man

agem

ent a

re:

how

the

empl

oyee

has

ach

ieve

d it,

incl

udin

g qu

an-

titat

ive

(res

ults

) and

qua

litat

ive

(beh

avio

ral)

perf

or-

man

ce in

dica

tors

Our

ann

ual p

erfo

rman

ce m

anag

emen

t pro

cess

see

ks

to ta

ke a

com

preh

ensi

ve a

nd b

alan

ced

view

of o

ur

empl

oyee

s’ p

erfo

rman

ce b

y as

sess

ing

empl

oyee

s in

fo

ur k

ey a

reas

:

Our p

roce

ss lo

oks

at p

erfo

rman

ce h

olis

tical

ly, s

olic

iting

in

put f

rom

mul

tiple

sou

rces

, inc

ludi

ng p

eers

, sub

ordi

-na

tes,

and

risk

and

con

trol

func

tions

. We

rein

forc

e ou

r co

nduc

t and

con

trol

s cu

lture

with

com

mon

exp

ecta

tions

an

d as

sess

men

t too

ls. F

or o

ur m

ore

seni

or e

mpl

oyee

s,

we

have

a s

tand

ard,

firm

wid

e 36

0 de

gree

-typ

e su

rvey

to

ol to

col

lect

feed

back

from

pee

rs a

nd s

ubor

dina

tes

on

beha

vior

s th

ey d

emon

stra

te d

ay to

day

. The

firs

t que

stio

n in

that

sur

vey

asks

whe

ther

the

empl

oyee

exe

mpl

ifies

the

high

est s

tand

ard

of e

thic

s an

d in

tegr

ity. T

his

info

rmat

ion

is a

ver

y im

port

ant i

nput

into

the

man

ager

’s ov

eral

l eva

lu-

atio

n of

the

empl

oyee

.

We

also

reco

gniz

e th

e im

port

ance

of a

per

form

ance

re

view

pro

cess

that

enc

oura

ges

seni

or m

anag

emen

t to

take

resp

onsi

bilit

y, o

wne

rshi

p an

d ac

coun

tabi

lity

for r

isk

and

cont

rol i

ssue

s. W

e ha

ve e

nhan

ced

our r

evie

w p

roce

ss

for o

ur m

ater

ial r

isk

take

rs to

driv

e he

ight

ened

exp

ecta

-tio

ns a

cros

s th

e or

gani

zatio

n w

ith s

tand

ard

chec

klis

ts a

nd

cons

iste

nt e

valu

atio

n of

risk

and

con

trol

s. In

add

ition

, we

solic

it di

rect

feed

back

from

the

rele

vant

risk

and

con

trol

le

ads

on o

ur m

ost m

ater

ial r

isk

take

rs a

nd c

ontr

olle

rs.

The

eval

uatio

n of

a p

oten

tial p

rom

otio

n in

clud

es a

revi

ew

of th

e sc

ope,

resp

onsi

bilit

ies,

per

form

ance

and

oth

er k

ey

lead

ersh

ip a

ttrib

utes

ass

ocia

ted

with

the

role

. Pro

mot

ions

ar

e ba

sed

on th

e in

divi

dual

’s st

rong

per

form

ance

(ove

r a

sust

aine

d pe

riod)

and

ski

lls n

eede

d to

mee

t the

dem

ands

of

the

busi

ness

or f

unct

ion.

Risk

and

con

trol

con

side

ratio

ns a

re a

n im

port

ant p

art

of o

ur p

rom

otio

n pr

oces

s. F

urth

er, f

or m

ore

seni

or-

leve

l pro

mot

ions

, we

have

impl

emen

ted

an e

nhan

ced

revi

ew p

roce

ss, i

nclu

ding

bac

kgro

und

and

perf

orm

ance

hi

stor

y ch

ecks

.

The

com

pany

doe

s no

t tol

erat

e m

isco

nduc

t. W

here

pe

rfor

man

ce re

view

s or

oth

er c

ircum

stan

ces

show

that

an

indi

vidu

al is

not

mee

ting

expe

ctat

ions

or a

cts

cont

rary

to

our

cor

pora

te s

tand

ards

, the

com

pany

will

und

erta

ke

a se

ries

of m

easu

res

that

may

incl

ude

chan

ges

in jo

b re

spon

sibi

lity,

add

ition

al tr

aini

ng, f

urth

er fo

rmal

revi

ews

or d

isci

plin

ary

actio

n, in

clud

ing

term

inat

ion

for m

isco

n-du

ct. P

erfo

rman

ce a

sses

smen

ts, p

rom

otio

n re

view

s an

d co

mpe

nsat

ion

act t

oget

her t

o re

info

rce

the

beha

vior

s th

at

refle

ct o

ur B

usin

ess

Prin

cipl

es.O

UR

EM

PLO

YEE

LIFE

CYC

LEH

OW

WE

DO

BU

SIN

ESS

— O

UR

CO

RPO

RAT

E CU

LTU

RE

22 Com

pens

atio

n

Com

pens

atio

n is

a c

ritic

al to

ol to

att

ract

and

reta

in to

p ta

lent

that

act

s w

ith in

tegr

ity. T

he p

rinc

ipal

und

erpi

n-ni

ngs

of o

ur c

ompe

nsat

ion

syst

em a

re s

tron

g go

ver-

nanc

e, a

n ac

ute

focu

s on

per

form

ance

, sha

reho

lder

al

ignm

ent,

sens

itivi

ty to

the

rele

vant

mar

ketp

lace

and

a

long

-ter

m o

rien

tatio

n, a

s ill

ustr

ated

in th

e fo

llow

ing

prin

cipl

es a

dopt

ed b

y ou

r Bo

ard:

com

pens

atio

n pr

actic

es a

nd p

rinc

iple

s an

d th

eir

impl

emen

tatio

n sh

ould

ens

ure

prop

er g

over

nanc

e an

d re

gula

tory

com

plia

nce.

help

att

ract

and

reta

in th

e be

st ta

lent

nec

essa

ry to

gr

ow a

nd s

usta

in o

ur b

usin

ess.

cultu

re s

houl

d be

enc

oura

ged

and

rew

arde

d.

perf

orm

ance

and

rew

ardi

ng b

ehav

ior

that

gen

erat

es

sust

aine

d va

lue

for

the

com

pany

thro

ugh

busi

ness

cy

cles

mea

ns c

ompe

nsat

ion

shou

ld n

ot b

e ov

erly

ri

gid,

form

ulai

c or

sho

rt-t

erm

ori

ente

d.

vest

ing)

sho

uld

crea

te a

mea

ning

ful o

wne

rshi

p st

ake

in th

e co

mpa

ny, s

hare

hold

er a

lignm

ent a

nd

rete

ntio

n of

top

tale

nt.

and

repa

ymen

t pol

icie

s sh

ould

be

robu

st e

noug

h to

de

ter

exce

ssiv

e ri

sk ta

king

and

str

ike

a ba

lanc

e in

m

akin

g co

mpe

nsat

ion-

rela

ted

deci

sion

s.

of

exe

cutiv

e pe

rqui

site

s, s

peci

al e

xecu

tive

re

tirem

ent b

enefi

ts, s

peci

al s

ever

ance

pla

ns

and

gold

en p

arac

hute

s.

We

desi

gn o

ur c

ompe

nsat

ion

prog

ram

s to

be

supp

ortiv

e of

our

com

pany

goa

ls a

nd s

trat

egic

impe

r-at

ives

and

to d

rive

sha

reho

lder

val

ue. T

o ac

hiev

e th

at

end,

we

have

und

erta

ken

a nu

mbe

r of

act

ions

with

the

aim

of i

nteg

ratin

g ri

sk m

anag

emen

t with

com

pens

a-tio

n pr

oces

ses,

rei

nfor

cing

str

ong

gove

rnan

ce p

ract

ices

an

d ty

ing

pay

to p

erfo

rman

ce.

Firs

t and

fore

mos

t, w

e op

erat

e un

der

a pa

y-fo

r-

perf

orm

ance

fram

ewor

k. A

ccor

ding

ly, o

ur v

aria

ble

ince

ntiv

e aw

ards

refl

ect b

usin

ess

unit

and

indi

vidu

al

perf

orm

ance

ove

r a

mul

ti-ye

ar ti

me

fram

e; a

ccou

nt

for

risk

and

con

trol

out

com

es; a

nd a

sses

s ac

hiev

e-m

ent t

owar

d sh

ort-

and

long

-ter

m o

bjec

tives

. We

care

no

t onl

y ab

out w

hat r

esul

ts a

re b

ut a

lso

how

they

ar

e ac

hiev

ed. T

his

enab

les

us to

rew

ard

actio

ns a

nd

outc

omes

that

may

not

incr

ease

rev

enue

but

ser

ve th

e co

mpa

ny’s

inte

rest

s in

oth

er r

espe

cts

— e

.g.,

deve

l-op

ing

a pr

omis

ing

busi

ness

or

even

arr

angi

ng fo

r th

e pr

uden

t dis

posi

tion

of a

sset

s or

bus

ines

s or

dec

idin

g no

t to

ente

r a

part

icul

ar b

usin

ess.

To a

chie

ve a

bal

ance

d, h

olis

tic a

ppro

ach,

we

utili

ze th

e fo

llow

ing

pay

prac

tices

:

Pay

at r

isk.

A m

eani

ngfu

l am

ount

of v

aria

ble

com

pen-

satio

n (a

maj

ority

for o

ur O

pera

ting

Com

mitt

ee

mem

bers

) is

“at r

isk”

and

con

tinge

nt o

n ac

hiev

emen

t of

bus

ines

s go

als

that

are

inte

gral

ly li

nked

to s

hare

-ho

lder

val

ue a

nd s

afet

y an

d so

undn

ess.

We

mea

sure

th

e pe

rfor

man

ce o

f our

Ope

ratin

g Co

mm

ittee

m

embe

rs o

ver a

mul

ti-ye

ar h

oriz

on a

cros

s fo

ur b

road

ca

tego

ries

(peo

ple

man

agem

ent a

nd le

ader

ship

, ris

k an

d co

ntro

l foc

us, c

usto

mer

focu

s an

d bu

sine

ss

perf

orm

ance

) in

orde

r to

appr

opria

tely

bal

ance

sh

ort-,

med

ium

- and

long

-ter

m g

oals

that

driv

e su

stai

ned

shar

ehol

der v

alue

whi

le a

ccou

ntin

g fo

r ris

k an

d co

ntro

l out

com

es.

OU

R E

MPL

OYE

E LI

FE C

YCLE

HO

W W

E D

O B

USI

NES

S —

OU

R C

OR

POR

ATE

CULT

UR

E23

Pay

for

sust

aine

d pe

rfor

man

ce. F

or m

ore

than

30,

000

of o

ur e

mpl

oyee

s, a

mea

ning

ful a

mou

nt o

f var

iabl

e co

mpe

nsat

ion

(and

a m

ajor

ity o

f var

iabl

e co

mpe

n-sa

tion

for

our

Ope

ratin

g Co

mm

ittee

mem

bers

) is

in

rest

rict

ed s

tock

uni

ts th

at a

re m

anda

tori

ly d

efer

red

for

thre

e ye

ars,

with

fina

l pay

out l

evel

s ba

sed

on o

ur

stoc

k pr

ice

whe

n aw

ards

ves

t (i.e

., if

our

stoc

k pr

ice

goes

dow

n, a

war

d va

lues

go

dow

n an

d vi

ce v

ersa

). In

ad

ditio

n, d

efer

red

stoc

k aw

ards

are

sub

ject

to fo

rfei

-tu

re in

the

even

t of s

epar

atio

n fr

om s

ervi

ce a

nd, f

or

our

Ope

ratin

g Co

mm

ittee

mem

bers

and

mat

eria

l ris

k ta

kers

, a s

ubst

antia

l por

tion

is s

ubje

ct to

can

cella

-tio

n if

perf

orm

ance

thre

shol

ds a

re n

ot m

et.

Impa

ct o

f ris

k ev

ents

. We

cons

ider

mat

eria

l ris

k an

d co

ntro

l iss

ues

at th

e co

mpa

ny, l

ine

of b

usin

ess

and

indi

vidu

al le

vels

and

mak

e ad

just

men

ts to

com

pen-

satio

n, w

hen

appr

opri

ate,

for

rele

vant

em

ploy

ees.

Stro

ng s

hare

ow

ners

hip

guid

elin

es a

nd h

oldi

ng

requ

irem

ents

. Ope

ratin

g Co

mm

ittee

mem

bers

now

ar

e re

quire

d to

ow

n a

min

imum

of 2

00,0

00 to

40

0,00

0 sh

ares

of o

ur c

omm

on s

tock

, and

the

CEO

m

ust o

wn

a m

inim

um o

f 1,0

00,0

00 s

hare

s. T

he p

olic

y w

as u

pdat

ed in

201

3, a

llow

ing

Oper

atin

g Co

mm

ittee

m

embe

rs u

p to

six

yea

rs to

com

ply.

In a

dditi

on,

Oper

atin

g Co

mm

ittee

mem

bers

mus

t hol

d (fo

r as

long

as

they

are

on

the

Oper

atin

g Co

mm

ittee

) 50%

of

net s

hare

s th

at v

est a

s pa

rt o

f our

equ

ity c

ompe

nsa-

tion

prog

ram

, whi

ch s

erve

s to

alig

n th

eir s

hort

- and

lo

ng-t

erm

inte

rest

s w

ith th

ose

of s

hare

hold

ers.

Stro

ng c

law

back

pol

icy.

Com

preh

ensi

ve re

cove

ry

prov

isio

ns e

nabl

e us

, whe

re le

gally

per

mis

sibl

e,

to c

ance

l or r

educ

e un

vest

ed a

war

ds o

r req

uire

re

paym

ent o

f cas

h or

equ

ity c

ompe

nsat

ion

alre

ady

paid

in c

erta

in s

ituat

ions

, inc

ludi

ng a

mat

eria

l fin

anci

al re

stat

emen

t, em

ploy

ee m

isco

nduc

t, fa

ilure

to

ach

ieve

min

imum

fina

ncia

l thr

esho

lds

and

othe

r ri

sk-r

elat

ed e

vent

s. W

e al

so re

tain

the

righ

t to

redu

ce c

urre

nt-y

ear

ince

ntiv

es to

redr

ess

any

prio

r im

bala

nce

that

we

subs

eque

ntly

det

erm

ine

may

hav

e

exis

ted.

The

se p

rovi

sion

s ho

ld e

xecu

tives

acc

ount

-ab

le, w

hen

appr

opri

ate,

for

sign

ifica

nt a

ctio

ns o

r ite

ms

that

neg

ativ

ely

affec

t bus

ines

s pe

rfor

man

ce

in c

urre

nt o

r fu

ture

yea

rs. F

or th

e CI

O in

cide

nt, f

or

exam

ple,

the

com

pany

cla

wed

bac

k or

can

cele

d

mor

e th

an $

100

mill

ion

of c

ompe

nsat

ion

thro

ugh

thes

e m

echa

nism

s.

Hed

ging

/ple

dgin

g po

licy.

All

empl

oyee

s ar

e pr

ohib

-ite

d fr

om th

e he

dgin

g of

unv

este

d re

stri

cted

sto

ck

units

, and

une

xerc

ised

opt

ions

or

stoc

k ap

prec

iatio

n ri

ghts

, and

, for

Ope

ratin

g Co

mm

ittee

mem

bers

, the

he

dgin

g of

any

sha

res

owne

d ou

trig

ht o

r th

roug

h de

ferr

ed c

ompe

nsat

ion

also

is p

rohi

bite

d.

Com

peti

tive

ben

chm

arki

ng. T

o m

ake

fully

info

rmed

de

cisi

ons

on p

ay le

vels

and

pay

pra

ctic

es, w

e be

nchm

ark

ours

elve

s ag

ains

t pee

r gr

oups

des

ig-

nate

d by

our

Boa

rd. W

e be

lieve

ext

erna

l mar

ket

data

is a

n im

port

ant c

ompo

nent

of s

ettin

g pa

y le

vels

to a

ttra

ct a

nd r

etai

n to

p ta

lent

whi

le d

rivi

ng

shar

ehol

der

valu

e.

Shar

ehol

der

outr

each

. Eac

h ye

ar, w

e so

licit

inve

stor

fe

edba

ck o

n ou

r co

mpe

nsat

ion

prog

ram

s an

d pr

actic

es, i

nclu

ding

thro

ugh

the

annu

al s

hare

hold

er

advi

sory

vot

e on

exe

cutiv

e co

mpe

nsat

ion

(“sa

y on

pa

y”),

and

cons

ider

suc

h fe

edba

ck in

det

erm

inin

g fu

ture

pay

pra

ctic

es.

Ove

r th

e co

urse

of 2

013,

and

con

tinui

ng in

201

4, w

e to

ok a

num

ber

of s

teps

to e

nhan

ce o

ur r

isk

and

cont

rol

prac

tices

as

they

rela

te to

com

pens

atio

n, in

clud

ing:

Enha

nced

ris

k re

view

pro

cess

. We

impl

emen

ted

an

enha

nced

ris

k re

view

pro

cess

acr

oss

the

com

pany

th

at fu

rthe

r st

reng

then

s th

e co

nnec

tion

amon

g ri

sk,

cont

rols

and

com

pens

atio

n. T

he p

roce

ss id

entifi

es

and

eval

uate

s re

leva

nt r

isk

and

cont

rol i

ssue

s th

at

surf

ace

in v

ario

us fo

rum

s (in

clud

ing

Risk

com

mitt

ees

and

the

line

of b

usin

ess

Cont

rol c

omm

ittee

s) a

nd,

whe

n ap

prop

riat

e, in

itiat

es h

uman

reso

urce

s-

rela

ted

rem

edia

l act

ions

, suc

h as

redu

ctio

n of

va

riab

le c

ompe

nsat

ion

or s

epar

atio

n of

em

ploy

men

t.

OU

R E

MPL

OYE

E LI

FE C

YCLE

HO

W W

E D

O B

USI

NES

S —

OU

R C

OR

POR

ATE

CULT

UR

E24

Focu

sed

com

pens

atio

n po

ol r

evie

ws.

We

rest

ruct

ured

ou

r va

riab

le c

ompe

nsat

ion

pool

revi

ew p

roce

ss.

Busi

ness

per

form

ance

, inc

ludi

ng th

e im

pact

of r

isk

and

cont

rol i

tem

s, is

con

side

red

prio

r to

dev

elop

ing

prel

imin

ary

ince

ntiv

e po

ol g

uida

nce.

We

then

take

in

to a

ccou

nt o

ther

qua

litat

ive

fact

ors,

incl

udin

g pr

ogre

ss a

gain

st s

trat

egic

pri

oriti

es, r

isk

and

cont

rol

outc

omes

, sta

ffing

cha

nges

, peo

ple

man

agem

ent

prio

ritie

s an

d co

mpe

titiv

e m

arke

t tre

nds.

Bro

aden

ed s

hare

ret

enti

on/o

wne

rshi

p gu

idel

ines

. W

e br

oade

ned

our

shar

e re

tent

ion

guid

elin

es fo

r Op

erat

ing

Com

mitt

ee m

embe

rs, a

s ou

tline

d ab

ove,

to

incl

ude

a sh

are

owne

rshi

p re

quire

men

t tha

t mus

t be

met

with

in s

ix y

ears

.

Enha

nced

dis

clos

ure.

The

Apr

il 20

14 p

roxy

sta

tem

ent

incl

udes

a n

ew C

ompe

nsat

ion

Disc

ussi

on &

Ana

lysi

s pr

esen

tatio

n to

resp

ond

to s

hare

hold

er fe

edba

ck a

nd

to im

prov

e cl

arity

and

tran

spar

ency

.

Succ

essi

on p

lann

ing

Mai

ntai

ning

our

cor

pora

te s

tand

ards

and

str

ong

finan

cial

per

form

ance

for

the

long

term

requ

ires

a pi

pelin

e of

sup

erio

r ta

lent

, aug

men

ted

from

tim

e to

tim

e by

ext

erna

l hire

s, to

pro

vide

con

tinui

ty o

f suc

ces-

sion

for

our

Ope

ratin

g Co

mm

ittee

, inc

ludi

ng th

e CE

O

posi

tion,

and

sen

ior

posi

tions

bel

ow th

e O

pera

ting

Com

mitt

ee. B

uild

ing

on o

ur d

isci

plin

ed a

ppro

ach

to

man

agem

ent d

evel

opm

ent,

the

com

pany

regu

larl

y re

view

s ca

ndid

ates

to a

sses

s w

heth

er th

ey c

urre

ntly

are

re

ady

for

a ne

xt-le

vel r

ole,

as

wel

l as

futu

re p

oten

tial

succ

esso

rs to

eac

h m

embe

r of

the

Ope

ratin

g Co

mm

ittee

an

d to

eac

h m

embe

r’s d

irect

repo

rts.

Sim

ilar

succ

es-

sion

pla

nnin

g pr

oces

ses

focu

sed

on p

rese

nt a

nd fu

ture

le

ader

s oc

cur

in e

ach

of th

e co

mpa

ny’s

lines

of b

usin

ess

and

func

tions

.

Our

inde

pend

ent d

irect

ors

are

deep

ly in

volv

ed in

su

cces

sion

pla

nnin

g. S

ucce

ssio

n pl

anni

ng is

requ

ired

to b

e di

scus

sed

at le

ast a

nnua

lly b

y th

e in

depe

nden

t di

rect

ors

with

the

CEO.

Our

Lea

d In

depe

nden

t Dire

ctor

gu

ides

the

full

Boar

d co

nsid

erat

ion

of C

EO s

ucce

ssio

n.

The

Com

pens

atio

n &

Man

agem

ent D

evel

opm

ent

Com

mitt

ee o

f the

Boa

rd re

view

s th

e su

cces

sion

pla

ns

for

the

CEO

and

Ope

ratin

g Co

mm

ittee

. The

com

mitt

ee

advi

ses

the

Boar

d on

tale

nt d

evel

opm

ent,

dive

rsity

an

d su

cces

sion

pla

nnin

g fo

r ke

y ex

ecut

ives

. Boa

rd

mem

bers

freq

uent

ly in

tera

ct w

ith s

enio

r ex

ecut

ives

as

part

of B

oard

and

com

mitt

ee m

eetin

gs a

nd in

oth

er, l

ess

form

al s

ettin

gs. T

his

expo

sure

allo

ws

Boar

d m

embe

rs to

ob

serv

e th

e le

ader

ship

pot

entia

l and

sty

le o

f the

sen

ior

exec

utiv

es o

n a

mor

e pe

rson

al b

asis

.

The

CEO

als

o co

nduc

ts fo

rmal

tale

nt re

view

dis

cuss

ions

on

an

annu

al b

asis

with

eac

h O

pera

ting

Com

mitt

ee

mem

ber.

Duri

ng th

ese

mee

tings

, pot

entia

l suc

cess

ors

and

dire

ct re

port

s to

the

Ope

ratin

g Co

mm

ittee

mem

bers

ar

e di

scus

sed.

Act

ion

item

s de

velo

ped

for

succ

essi

on

plan

s ar

e tr

acke

d an

d as

sess

ed th

roug

hout

the

year

.

Out

stan

ding

peo

ple,

str

ong

lead

ersh

ip a

nd e

ffect

ive

gove

rnan

ce a

re th

e fo

unda

tion

of o

ur s

ucce

ss. T

he

com

pany

has

set

hig

h co

rpor

ate

stan

dard

s, a

nd u

nder

th

e le

ader

ship

of o

ur B

oard

and

man

agem

ent,

we

are

com

mitt

ed to

cre

atin

g an

env

ironm

ent i

n w

hich

all

our

peop

le o

pera

te w

ith in

tegr

ity, f

airn

ess

and

acco

unt-

abili

ty. W

e w

ill c

ontin

ue to

revi

ew a

nd a

naly

ze o

ur

peop

le p

ract

ices

, lea

ders

hip

stru

ctur

e an

d go

vern

ance

m

odel

s to

ens

ure

that

they

refle

ct a

nd s

uppo

rt o

ur

adhe

renc

e to

our

cor

pora

te s

tand

ards

and

that

we

are

wel

l-pos

ition

ed to

ser

ve o

ur c

usto

mer

s, s

hare

hold

ers

and

com

mun

ities

toda

y an

d in

the

futu

re.

OU

R E

MPL

OYE

E LI

FE C

YCLE

III.

OU

R C

ON

TRO

L EN

VIR

ON

MEN

T

HO

W W

E D

O B

USI

NES

S —

OU

R C

ON

TRO

L EN

VIR

ON

MEN

T26

HO

W W

E D

O B

USI

NES

S —

OU

R C

ON

TRO

L EN

VIR

ON

MEN

T27

OU

R C

ON

TRO

L EN

VIR

ON

MEN

T

Ove

r th

e pa

st s

ever

al y

ears

, our

con

trol

age

nda

has

been

a to

p pr

iori

ty. T

his

com

mitm

ent i

s ev

iden

ced

by

fund

amen

tal c

hang

es th

at h

ave

been

impl

emen

ted

acro

ss th

e co

mpa

ny to

enh

ance

gov

erna

nce

and

over

sigh

t of o

ur c

ontr

ol e

nviro

nmen

t and

to s

impl

ify

and

appr

opri

atel

y de

-ris

k ou

r op

erat

ions

, as

wel

l as

by

the

subs

tant

ial a

dditi

onal

inve

stm

ents

in fi

nanc

ial a

nd

hum

an c

apita

l ded

icat

ed to

the

effor

ts.

Our

con

trol

env

ironm

ent c

an b

e th

ough

t of i

n te

rms

of

the

busi

ness

es, t

he c

ontr

ol fu

nctio

ns a

nd In

tern

al A

udit:

Firs

t lin

e of

def

ense

. The

line

s of

bus

ines

s ea

ch a

re

resp

onsi

ble

for

deve

lopi

ng a

nd m

aint

aini

ng e

ffect

ive

inte

rnal

con

trol

s fo

r th

eir

resp

ectiv

e bu

sine

ss

lines

. The

y al

so a

re a

ccou

ntab

le fo

r id

entif

ying

and

ad

dres

sing

the

risk

s pr

esen

ted

by th

eir

resp

ectiv

e bu

sine

sses

and

for

oper

atin

g w

ithin

a s

ound

con

trol

en

viro

nmen

t. Th

e fir

st li

ne o

f def

ense

als

o in

clud

es

Ove

rsig

ht &

Con

trol

, whi

ch is

des

igne

d to

ens

ure

a st

rong

and

con

sist

ent c

ontr

ol e

nviro

nmen

t acr

oss

the

orga

niza

tion.

Cont

rol f

unct

ions

. In

addi

tion

to O

vers

ight

&

Cont

rol,

our

cont

rol f

unct

ions

incl

ude

Risk

, Fin

ance

Co

mpl

ianc

e an

d Le

gal.

They

eac

h ha

ve th

eir

own

set o

f res

pons

ibili

ties

but w

ork

toge

ther

to p

rovi

de

over

sigh

t of t

he b

usin

esse

s an

d se

t firm

wid

e co

ntro

l pol

icie

s.

Inte

rnal

Aud

it. T

he In

tern

al A

udit

func

tion

oper

ates

in

depe

nden

tly fr

om o

ther

par

ts o

f the

com

pany

, pr

ovid

ing

test

ing

and

eval

uatio

n of

pro

cess

es a

nd

cont

rols

acr

oss

the

entir

e en

terp

rise

. The

Inte

rnal

Au

dit t

eam

ass

esse

s th

e eff

ectiv

enes

s of

our

gov

er-

nanc

e, ri

sk m

anag

emen

t and

inte

rnal

con

trol

s;

eval

uate

s ou

r com

plia

nce

with

law

s an

d re

gula

-tio

ns; a

nd id

entifi

es o

ppor

tuni

ties

for

impr

ovem

ent.

Thro

ugh

this

str

uctu

re, w

e se

ek to

sub

ject

bus

ines

s de

cisi

ons

and

actio

ns to

rig

orou

s co

nsid

erat

ion,

te

stin

g an

d re

view

for

com

plia

nce

with

rele

vant

law

s an

d re

gula

tions

, as

wel

l as

cons

iste

ncy

with

our

Bu

sine

ss P

rinc

iple

s.

We

have

take

n nu

mer

ous

step

s an

d sp

ent c

onsi

dera

ble

time

and

mon

ey e

nhan

cing

our

con

trol

env

ironm

ent.

To

prov

ide

cont

ext f

or th

e br

eadt

h of

this

effo

rt, t

hree

dat

a po

ints

are

wor

th n

otin

g:

sinc

e th

e be

ginn

ing

of 2

012

thro

ugh

the

end

of 2

014

to s

uppo

rt o

ur re

gula

tory

, com

plia

nce

and

cont

rol

effor

ts a

cros

s th

e en

tire

com

pany

, and

dur

ing

2013

, ou

r em

ploy

ees

com

plet

ed m

ore

than

1 m

illio

n ho

urs

of tr

aini

ng re

late

d to

ris

k, c

ontr

ol a

nd c

ompl

ianc

e.

was

spe

nt in

201

2 fo

r ad

ditio

nal e

xpen

ses

on

regu

lato

ry a

nd c

ontr

ol is

sues

.

on te

chno

logy

focu

sed

on o

ur re

gula

tory

, con

trol

and

co

ntro

l-rel

ated

age

nda

acro

ss th

e fir

m.

On

the

next

pag

es, w

e pr

ovid

e fu

rthe

r de

tail

on h

ow w

e ha

ve e

nhan

ced

our c

ontr

ol e

nviro

nmen

t.

Each

line

of b

usin

ess

owns

the

risk

s in

here

nt in

its

oper

atio

ns

and

is a

ccou

ntab

le fo

r m

aint

aini

ng

effec

tive

inte

rnal

con

trol

s to

safe

guar

d th

e co

mpa

ny.

HO

W W

E D

O B

USI

NES

S —

OU

R C

ON

TRO

L EN

VIR

ON

MEN

T28 EN

HA

NCI

NG

GO

VER

NA

NCE

To h

elp

stre

ngth

en th

e go

vern

ance

of o

ur c

ontr

ol e

nvi-

ronm

ent,

we

crea

ted

seve

ral n

ew g

over

nanc

e co

mm

it-te

es a

t a fi

rmw

ide,

line

of b

usin

ess,

con

trol

func

tion

and

regi

on le

vel.

Firm

wid

e co

mm

ittee

s en

able

us

to b

ette

r un

ders

tand

an

d ad

dres

s is

sues

by

serv

ing

as c

entr

al fo

rum

s fo

r di

scus

sing

and

reso

lvin

g is

sues

that

affe

ct th

e co

mpa

ny

as a

who

le o

r on

e or

mor

e lin

es o

f bus

ines

s. E

qual

ly

impo

rtan

t, th

ese

com

mitt

ees

give

us

the

oppo

rtun

ity

to s

hare

bes

t pra

ctic

es a

nd le

sson

s le

arne

d ac

ross

the

com

pany

. Som

e of

the

com

mitt

ees

we

have

cre

ated

du

ring

the

past

few

yea

rs a

re:

Firm

wid

e Ri

sk C

omm

itte

e (e

stab

lishe

d in

201

2):

Co-c

haire

d by

the

com

pany

’s CE

O a

nd C

hief

Ris

k O

ffice

r, th

is is

our

hig

hest

man

agem

ent-

leve

l Ris

k co

mm

ittee

. It s

erve

s as

an

esca

latio

n po

int f

or r

isk

topi

cs a

nd is

sues

rais

ed b

y its

mem

bers

, the

line

of

bus

ines

s Ri

sk c

omm

ittee

s, a

nd o

ther

sub

ordi

-na

te c

omm

ittee

s, s

uch

as th

e Fi

rmw

ide

Cont

rol

Com

mitt

ee, F

irm

wid

e Fi

duci

ary

Risk

Com

mitt

ee,

Repu

tatio

n Ri

sk c

omm

ittee

s an

d re

gion

al R

isk

com

mitt

ees.

The

com

mitt

ee e

scal

ates

sig

nific

ant

issu

es to

the

Boar

d of

Dire

ctor

s, a

s ap

prop

riat

e.

Firm

wid

e Co

ntro

l Com

mit

tee

(est

ablis

hed

in

2013

): Co

-cha

ired

by th

e co

mpa

ny’s

Chie

f Con

trol

O

ffice

r an

d th

e he

ad o

f Fir

mw

ide

Ope

ratio

nal R

isk

Gove

rnan

ce/M

odel

Ris

k an

d De

velo

pmen

t, th

is

com

mitt

ee p

rovi

des

a m

onth

ly fo

rum

for

revi

ewin

g an

d di

scus

sing

firm

wid

e op

erat

iona

l ris

k, in

clud

ing

exis

ting

and

emer

ging

issu

es, m

etri

cs a

nd m

anag

e-m

ent,

and

revi

ews

exec

utio

n ag

ains

t the

ope

ratio

nal

risk

man

agem

ent f

ram

ewor

k (d

iscu

ssed

on

the

next

pa

ge).

It se

rves

as

an e

scal

atio

n po

int f

or th

e lin

e of

bu

sine

ss, f

unct

iona

l and

regi

onal

Con

trol

com

mit-

tees

and

furt

her

esca

late

s si

gnifi

cant

issu

es to

the

Firm

wid

e Ri

sk C

omm

ittee

, as

appr

opri

ate.

Firm

wid

e Fi

duci

ary

Risk

Com

mit

tee

(est

ablis

hed

in 2

013)

: Thi

s co

mm

ittee

pro

vide

s a

foru

m fo

r ri

sk

mat

ters

rela

ted

to th

e co

mpa

ny’s

fiduc

iary

act

iviti

es

and

over

sees

the

firm

wid

e fid

ucia

ry r

isk

gove

rnan

ce

fram

ewor

k, w

hich

sup

port

s th

e co

nsis

tent

iden

ti-fic

atio

n an

d es

cala

tion

of fi

duci

ary

risk

mat

ters

by

the

rele

vant

line

s of

bus

ines

s or

cor

pora

te fu

nctio

ns

resp

onsi

ble

for

man

agin

g fid

ucia

ry a

ctiv

ities

. Th

e co

mm

ittee

esc

alat

es s

igni

fican

t iss

ues

to th

e Fi

rmw

ide

Risk

Com

mitt

ee, t

he B

oard

of D

irect

ors’

Ri

sk P

olic

y Co

mm

ittee

and

Aud

it Co

mm

ittee

, and

any

ot

her

com

mitt

ee c

onsi

dere

d ap

prop

riat

e.

We

also

hav

e a

Firm

wid

e Re

puta

tion

Risk

Gov

erna

nce

grou

p th

at s

eeks

to p

rom

ote

cons

iste

nt m

anag

emen

t of

repu

tatio

nal r

isk

acro

ss th

e co

mpa

ny. I

ts o

bjec

tives

ar

e to

incr

ease

vis

ibili

ty o

f rep

utat

ion

risk

gov

erna

nce;

pr

omot

e an

d m

aint

ain

a gl

obal

ly c

onsi

sten

t gov

erna

nce

mod

el fo

r re

puta

tion

risk

acr

oss

lines

of b

usin

ess;

pr

omot

e ea

rly

self-

iden

tifica

tion

of p

oten

tial r

eput

atio

n ri

sks

to th

e co

mpa

ny; a

nd p

rovi

de th

ough

t lea

ders

hip

on

cros

s-lin

e of

bus

ines

s re

puta

tion

risk

issu

es. R

ecen

tly,

the

grou

p he

lped

impr

ove

repu

tatio

n ri

sk m

anag

emen

t th

roug

h th

e ad

optio

n of

one

firm

wid

e po

licy

and

the

impl

emen

tatio

n of

app

ropr

iate

ly c

onsi

sten

t gov

erna

nce

with

in th

e lin

es o

f bus

ines

s.

As p

art o

f our

gov

erna

nce

stru

ctur

e, w

e al

so h

ave

Risk

and

Con

trol

com

mitt

ees

for

our

lines

of b

usin

ess,

co

rpor

ate

func

tions

and

regi

ons:

ENH

AN

CIN

G G

OV

ERN

AN

CE

HO

W W

E D

O B

USI

NES

S —

OU

R C

ON

TRO

L EN

VIR

ON

MEN

T29

line

of b

usin

ess,

func

tion

or re

gion

al R

isk

com

mitt

ee

and

also

esc

alat

e si

gnifi

cant

ris

k is

sues

(and

/or

risk

issu

es w

ith p

oten

tial fi

rmw

ide

impa

ct) t

o th

e Fi

rmw

ide

Cont

rol C

omm

ittee

.

In a

dditi

on to

thes

e co

mm

ittee

s, th

ere

are

othe

r m

anag

emen

t com

mitt

ees

and

foru

ms

at th

e co

mpa

ny,

line

of b

usin

ess

and

regi

onal

leve

ls, w

here

ris

k-re

late

d to

pics

and

a b

road

rang

e of

oth

er to

pics

, suc

h as

cap

ital

and

stra

tegy

, are

dis

cuss

ed.

Ris

k co

mm

itte

es o

vers

ee th

e in

here

nt r

isks

in th

e re

spec

tive

line

of b

usin

ess,

func

tion

or re

gion

, in

clud

ing

the

revi

ew, a

sses

smen

t and

dec

isio

n m

akin

g re

latin

g to

spe

cific

ris

ks, r

isk

stra

tegy

, pol

icy

and

cont

rols

. The

se c

omm

ittee

s es

cala

te is

sues

to

the

Firm

wid

e Ri

sk C

omm

ittee

, as

appr

opri

ate.

Cont

rol c

omm

ittee

s ov

erse

e th

e op

erat

iona

l ris

ks

and

cont

rol e

nviro

nmen

t of t

he re

spec

tive

line

of

busi

ness

, fun

ctio

n or

regi

on. T

hese

com

mitt

ees

esca

late

ope

ratio

nal r

isk

issu

es to

thei

r re

spec

tive

Boar

d of

Dir

ecto

rsBo

ard

of D

irec

tors

’ Ris

k Po

licy

Com

mitt

ee, A

udit

Com

mitt

ee a

nd C

ompe

nsat

ion

& M

anag

emen

t Dev

elop

men

t Com

mitt

ee

Ope

rati

ng C

omm

itte

e

Chie

f Exe

cuti

ve

Offi

cer

Line

of

Busi

ness

CEO

sH

ead

of H

uman

Reso

urce

sCh

ief O

pera

ting

Offi

cer

Firm

wid

e As

set L

iabi

lity

Com

mit

tee

Firm

wid

e Ri

skCo

mm

itte

e

Firm

wid

e Va

luat

ion

Gove

rnan

ce F

orum

Asse

tM

anag

emen

tRi

sk

Com

mit

tee

CIO,

Tre

asur

yan

d Co

rpor

ate

Risk

Co

mm

itte

e

Com

mer

cial

Bank

ing

Risk

Co

mm

itte

e

Corp

orat

e &

Inve

stm

ent B

ank

Risk

Co

mm

itte

e

Cons

umer

&Co

mm

unit

y Ba

nkin

g Ri

sk

Com

mit

tee

1

As a

pplic

able

CE

O =

Chi

ef E

xecu

tive

Offi

cer

C

IO =

Chi

ef In

vest

men

t Offi

ce

Line

of B

usin

ess

and

Func

tion

Con

trol

Com

mit

tees

1

Line

of B

usin

ess

Fidu

ciar

y Ri

sk C

omm

itte

es1

Line

of B

usin

ess

Repu

tati

on R

isk

Com

mit

tees

1

Inte

rnal

Au

dit

Firm

wid

e Co

ntro

lCo

mm

itte

e

Firm

wid

e Re

puta

tion

Ris

kGo

vern

ance

Firm

wid

e Fi

duci

ary

Risk

Com

mit

tee

Firm

wid

e Ca

pita

l Gov

erna

nce

Com

mit

tee

Chie

f Ris

kO

ffice

rCh

ief F

inan

cial

Offi

cer

Gene

ral

Coun

sel

ENH

AN

CIN

G G

OV

ERN

AN

CE

Gov

erna

nce

stru

ctur

e

HO

W W

E D

O B

USI

NES

S —

OU

R C

ON

TRO

L EN

VIR

ON

MEN

T30 FI

RST

LIN

E O

F D

EFEN

SE

Our

line

s of

bus

ines

s ar

e re

spon

sibl

e fo

r dev

elop

ing

and

mai

ntai

ning

an

effec

tive

cont

rol e

nviro

nmen

t for

thei

r re

spec

tive

busi

ness

es. A

s th

e fir

st li

ne o

f def

ense

, the

lin

es o

f bus

ines

s he

lp fa

cilit

ate

early

iden

tifica

tion

and

esca

latio

n of

issu

es. T

his

enab

les

us to

find

pot

entia

l is

sues

bef

ore

they

bec

ome

larg

er p

robl

ems

and

brin

g in

th

e ap

prop

riate

reso

urce

s to

add

ress

thes

e is

sues

qui

ckly

.

Ove

rsig

ht &

Con

trol

als

o is

par

t of t

he fi

rst l

ine

of

defe

nse.

It is

des

igne

d to

ens

ure

a st

rong

and

con

sist

ent

cont

rol e

nviro

nmen

t acr

oss

the

orga

niza

tion.

Ove

rsig

ht

& Co

ntro

l Offi

cers

(Con

trol

Offi

cers

) are

em

bedd

ed in

th

e bu

sine

sses

(and

, sim

ilarl

y, in

the

corp

orat

e fu

nctio

ns

and

regi

ons)

to h

elp

driv

e th

e co

ntro

l age

nda

acro

ss a

co

mm

on fi

rmw

ide

fram

ewor

k.

In th

is c

apac

ity, t

he C

ontr

ol O

ffice

rs s

erve

as

part

of t

he

first

line

of d

efen

se to

hel

p m

aint

ain

an e

ffect

ive

cont

rol

envi

ronm

ent.

Cont

rol O

ffice

rs re

port

dire

ctly

to th

e lin

e of

bus

ines

s, w

ith a

n ad

ditio

nal r

epor

ting

line

to th

e co

mpa

ny’s

Chie

f Con

trol

Offi

cer.

The

step

s w

e ar

e ta

king

to im

prov

e th

e fir

st li

ne o

f de

fens

e ar

e re

late

d to

five

com

mon

are

as:

busi

ness

Enha

ncin

g ou

r co

ntro

l pra

ctic

es in

the

lines

of b

usin

ess

Acro

ss o

ur c

ompa

ny, w

e ha

ve e

nhan

ced

our

cont

rol

prac

tices

with

the

obje

ctiv

e th

at e

ach

busi

ness

w

ill o

pera

te in

a w

ay th

at e

mbo

dies

our

cor

pora

te

stan

dard

s. B

elow

are

sev

eral

initi

ativ

es th

at d

emon

-st

rate

the

brea

dth

and

dept

h of

thes

e eff

orts

.

Ente

rpri

se-w

ide

prog

ram

s

A se

ries

of e

nter

pris

e-w

ide

prog

ram

s ha

s be

en a

pr

imar

y fo

cus.

The

se p

rogr

ams,

whi

ch a

re d

riven

by

the

Oper

atin

g Co

mm

ittee

and

repo

rted

to o

ur B

oard

, add

ress

si

gnifi

cant

, com

plex

, con

trol

-rel

ated

mat

ters

that

are

of

ten

cros

s-lin

e of

bus

ines

s an

d cr

oss-

geog

raph

ies.

Th

ey a

re m

atte

rs w

e be

lieve

sho

uld

be e

xam

ined

on

an

ente

rpris

e-w

ide

basi

s an

d, in

som

e in

stan

ces,

are

driv

en

by re

gula

tory

requ

irem

ents

. Our

goa

l is

to a

ppro

pria

tely

an

d co

nsis

tent

ly m

anag

e th

e as

soci

ated

risk

s an

d bu

ild

sust

aina

ble

and

cons

iste

nt s

olut

ions

. We

cont

inue

to

mak

e pr

ogre

ss o

n th

ese

prog

ram

s, in

clud

ing:

initi

ativ

es to

pro

perl

y as

sess

and

und

erst

and

the

risk

s to

the

com

pany

and

our

clie

nts/

cust

omer

s be

fore

we

intr

oduc

e ne

w p

rodu

cts,

ser

vice

s or

re

late

d ac

tiviti

es

and

back

offi

ces

to m

anag

e th

ese

rela

tions

hips

and

th

eir

asso

ciat

ed r

isks

to a

com

mon

set

of h

ighl

y de

velo

ped

stan

dard

s

Fede

ral R

eser

ve B

oard

’s Co

mpr

ehen

sive

Cap

ital a

nd

Anal

ysis

Rev

iew

and

Dod

d-Fr

ank

Act S

tres

s Te

stin

g ca

pita

l req

uire

men

ts, a

s w

ell a

s th

e co

ordi

natio

n of

the

com

pany

’s im

plem

enta

tion

of th

e Ba

sel

Com

mitt

ee o

n Ba

nkin

g Su

perv

isio

n’s

prin

cipl

es fo

r eff

ectiv

e ri

sk d

ata

aggr

egat

ion

and

risk

repo

rtin

g

FIR

ST L

INE

OF

DEF

ENSE

HO

W W

E D

O B

USI

NES

S —

OU

R C

ON

TRO

L EN

VIR

ON

MEN

T31

As p

rogr

am w

ork

tran

sitio

ns to

the

norm

al c

ours

e of

bu

sine

ss, w

e le

vera

ge o

ur e

xist

ing

gove

rnan

ce (R

isk

and

Cont

rol c

omm

ittee

s an

d ris

k an

d co

ntro

l sel

f-ass

essm

ents

) to

ach

ieve

ong

oing

sus

tain

abili

ty.

Anti

-Mon

ey L

aund

erin

g an

d Kn

ow Y

our

Cust

omer

The

com

pany

dev

otes

spe

cial

ized

att

entio

n to

com

pli-

ance

with

the

law

s an

d re

gula

tions

gov

erni

ng a

nti-

mon

ey la

unde

ring

(AM

L) a

nd te

rror

ist fi

nanc

ing,

ec

onom

ic s

anct

ions

and

ant

i-cor

rupt

ion

effor

ts. W

orki

ng

clos

ely

with

the

Glob

al F

inan

cial

Cri

mes

Com

plia

nce

(GFC

C) g

roup

(dis

cuss

ed o

n pa

ge 5

1), t

he b

usin

esse

s ha

ve m

ade

a nu

mbe

r of

enh

ance

men

ts to

Kno

w Y

our

Cust

omer

(KYC

) and

AM

L pr

oces

ses,

incl

udin

g th

e de

velo

pmen

t of m

ore

stri

ngen

t sta

ndar

ds th

at re

quire

ca

ptur

ing

and

fully

doc

umen

ting

deta

iled

clie

nt in

form

a-tio

n be

fore

an

acco

unt i

s op

ened

. Exa

mpl

es o

f spe

cific

im

prov

emen

ts in

clud

e:

AML/

KYC

oper

atin

g m

odel

with

regi

onal

AM

L/KY

C su

ppor

t tea

ms

that

alig

n to

sub

-line

s of

bus

ines

s.

This

incl

udes

add

ing

KYC

Offi

cers

who

par

tner

clo

sely

w

ith b

anke

rs to

ens

ure

timel

y an

d th

orou

gh c

ompl

e-tio

n of

clie

nt d

ocum

enta

tion

prog

ram

man

agem

ent a

nd c

reat

ing

team

s of

sub

ject

m

atte

r ex

pert

s th

at s

it w

ithin

the

busi

ness

es

-m

entin

g cl

ient

info

rmat

ion

and

refin

ing

clie

nt

onbo

ardi

ng te

chno

logy

to a

utom

ate

prev

ious

ly

man

ual p

roce

sses

clie

nts

enab

le u

s to

bet

ter

mon

itor

AML/

KYC

activ

ities

busi

ness

sta

ff in

ord

er to

incr

ease

acc

ount

abili

ty

AML/

KYC

trai

ning

pro

gram

for

fron

t offi

ce a

nd o

per-

atio

ns p

erso

nnel

Confl

icts

of i

nter

est

Due

to th

e br

eadt

h of

our

bus

ines

ses,

pot

entia

l con

flict

s of

inte

rest

may

aris

e in

a n

umbe

r of w

ays

and

form

s.

We

have

an

oblig

atio

n to

trea

t all

clie

nts

fairl

y. T

he

com

pany

’s po

licie

s an

d pr

oced

ures

are

des

igne

d to

ens

ure

that

the

com

pany

pay

s du

e re

gard

to th

e in

tere

sts

of e

ach

clie

nt a

nd m

anag

es a

ny p

oten

tial

confl

ict o

f int

eres

t app

ropr

iate

ly a

nd c

onsi

sten

tly w

ith

our C

ode

of C

ondu

ct a

nd B

usin

ess

Prin

cipl

es.

Sinc

e co

nflic

ts m

ay d

iffer

con

side

rabl

y ac

ross

line

s of

bu

sine

ss, i

n ad

ditio

n to

our

pol

icie

s an

d pr

oced

ures

, m

ultip

le c

ompl

emen

tary

con

trol

gro

ups,

incl

udin

g a

Confl

icts

Offi

ce, O

vers

ight

& C

ontr

ol, C

ompl

ianc

e an

d Le

gal,

wor

k cl

osel

y w

ith o

ur b

usin

ess

exec

utiv

es to

id

entif

y an

d m

anag

e th

e co

nflic

ts th

at a

rise,

bot

h re

al

and

perc

eive

d.

In g

ener

al, p

rior t

o se

ekin

g or

acc

eptin

g ne

w fi

nanc

ial

advi

sory

eng

agem

ents

, und

erw

ritin

g en

gage

men

ts (d

ebt

and

equi

ty),

arra

ngin

g ba

nk fi

nanc

ing

or m

akin

g ne

w

priv

ate

equi

ty in

vest

men

ts, a

s w

ell a

s en

gagi

ng in

cer

tain

ot

her t

rans

actio

ns, s

uch

as u

nusu

al o

r lar

ge e

quity

der

iv-

ativ

e tr

ansa

ctio

ns, t

he C

onfli

cts

Office

revi

ews

and

clea

rs

the

prop

osed

act

ivity

in c

onsu

ltatio

n w

ith th

e ap

pro-

pria

te m

anag

ers

and,

whe

re a

ppro

pria

te, o

ther

con

trol

fu

nctio

ns. C

lear

ance

from

the

Confl

icts

Offi

ce a

lso

is

requ

ired

for a

ny u

nder

taki

ngs

or a

gree

men

ts w

ith c

lient

s th

at re

stric

t the

com

pany

’s ab

ility

to e

ngag

e in

act

iviti

es

for o

ther

clie

nts,

whe

ther

thos

e ar

e fin

anci

ng a

ctiv

ities

, ad

viso

ry a

ctiv

ities

or o

ther

wis

e. In

add

ition

, for

fina

ncin

g an

d ad

viso

ry a

ctiv

ities

, the

Con

flict

s Offi

ce e

valu

ates

pr

opos

ed d

eal t

eam

sta

ffing

to h

elp

ensu

re th

at c

onfi-

dent

ial c

lient

info

rmat

ion

is a

ppro

pria

tely

saf

egua

rded

.

FIR

ST L

INE

OF

DEF

ENSE

HO

W W

E D

O B

USI

NES

S —

OU

R C

ON

TRO

L EN

VIR

ON

MEN

T32 Ac

ross

our

bus

ines

ses,

we

cont

inue

to re

fine

and

stre

ngth

en o

ur c

onfli

cts

man

agem

ent p

ract

ices

. For

ex

ampl

e, A

sset

Man

agem

ent h

as re

cent

ly c

reat

ed a

n en

hanc

ed c

onfli

cts

of in

tere

st fr

amew

ork

that

pro

vide

s a

disc

iplin

ed a

nd s

truc

ture

d ap

proa

ch to

con

flict

s,

incl

udin

g id

entifi

catio

n of

pot

entia

l con

flict

s pr

esen

t in

a b

usin

ess

unit’

s pr

oces

ses

and

a se

lf-as

sess

men

t to

dete

rmin

e w

heth

er c

ontr

ols

are

oper

atin

g as

exp

ecte

d.

Each

con

flict

is a

sses

sed

usin

g fo

ur p

illar

s: p

olic

ies

and

proc

edur

es, g

over

nanc

e an

d ov

ersi

ght,

disc

losu

res

and

valid

atio

n. T

he p

illar

fram

ewor

k pr

ovid

es m

inim

um

stan

dard

s to

driv

e gl

obal

con

sist

ency

whi

le a

llow

ing

for a

ppro

pria

te re

gion

al d

iffer

ence

s. T

he b

usin

ess

has

trai

ned

mor

e th

an 7

00 k

ey p

erso

nnel

on

confl

icts

m

anag

emen

t, th

e co

ntro

l fra

mew

ork

and

the

step

s to

co

nduc

t an

asse

ssm

ent.

Thro

ugh

the

enha

ncem

ent a

nd

impl

emen

tatio

n of

the

confl

icts

fram

ewor

k, e

mpl

oyee

s ha

ve b

een

furt

her e

duca

ted

on th

e id

entifi

catio

n an

d m

anag

emen

t of p

oten

tial c

onfli

cts.

We

now

are

impl

e-m

entin

g a

sim

ilar f

ram

ewor

k fo

r con

flict

s m

anag

emen

t ac

ross

the

com

pany

.

Man

agin

g en

viro

nmen

tal a

nd s

ocia

l ris

k in

tr

ansa

ctio

ns

Our f

ront

-line

sta

ff al

so is

trai

ned

to id

entif

y an

d ev

alua

te p

oten

tial e

nviro

nmen

tal a

nd s

ocia

l ris

ks

asso

ciat

ed w

ith c

erta

in tr

ansa

ctio

ns in

volv

ing

corp

orat

e le

ndin

g, d

ebt a

nd e

quity

und

erw

ritin

g, a

nd a

dvis

ory

serv

ices

. The

com

pany

pro

vide

s fin

anci

al s

ervi

ces

to

clie

nts

in in

dust

ries

that

are

crit

ical

ena

bler

s of

eco

nom

ic

grow

th a

nd s

ocia

l dev

elop

men

t, su

ch a

s oi

l and

gas

, m

inin

g an

d el

ectr

ic p

ower

– b

ut th

at a

lso

have

the

pote

ntia

l to

crea

te a

rang

e of

adv

erse

env

ironm

enta

l and

so

cial

impa

cts.

Thro

ugh

our c

onfli

cts

of in

tere

st p

roce

ss, w

e ap

ply

spec

ific

crite

ria to

tran

sact

ions

with

bot

h ne

w a

nd

exis

ting

clie

nts

to d

eter

min

e w

heth

er a

n en

viro

n-m

enta

l and

soc

ial r

isk

revi

ew is

nee

ded

and

to e

stab

lish

wha

t lev

el o

f due

dili

genc

e is

requ

ired.

The

se c

riter

ia

are

desc

ribed

in o

ur E

nviro

nmen

tal a

nd S

ocia

l Pol

icy

fram

ewor

k an

d in

clud

e:

oper

atin

g, a

s w

ell a

s th

e pr

opos

ed u

se o

f pro

ceed

s fr

om th

e tr

ansa

ctio

n

oil p

rodu

ctio

n an

d un

conv

entio

nal o

il an

d ga

s de

vel-

opm

ent,

incl

udin

g hy

drau

lic fr

actu

ring

, and

exp

lora

-tio

n an

d de

velo

pmen

t in

the

Arct

ic

Equa

tor

Prin

cipl

es, w

hich

app

ly to

the

follo

win

g fin

anci

al p

rodu

cts:

pro

ject

fina

nce,

pro

ject

-rel

ated

co

rpor

ate

loan

s an

d br

idge

loan

s

evid

ence

of f

orce

d or

chi

ld la

bor

All t

rans

actio

ns th

at re

quire

revi

ew a

re e

scal

ated

to th

e Gl

obal

Env

ironm

enta

l and

Soc

ial R

isk

Man

agem

ent t

eam

an

d ar

e ca

tego

rized

bas

ed o

n w

heth

er th

e pe

rcei

ved

leve

l of e

nviro

nmen

tal a

nd s

ocia

l ris

k is

hig

h, m

ediu

m o

r lo

w. R

ecen

t enh

ance

men

ts in

clud

e:

Polic

y fr

amew

ork

impa

ct m

anag

emen

t for

ons

hore

Nor

th A

mer

ican

cl

ient

s en

gage

d in

sha

le o

il an

d ga

s op

erat

ions

2013

; tra

inin

g ha

s co

ntin

ued

in 2

014

FIR

ST L

INE

OF

DEF

ENSE

HO

W W

E D

O B

USI

NES

S —

OU

R C

ON

TRO

L EN

VIR

ON

MEN

T33

Sale

s an

d tr

adin

g pr

acti

ces

In th

e fir

st q

uart

er o

f 201

4, th

e CI

B la

unch

ed a

com

pre-

hens

ive

revi

ew to

ana

lyze

and

mak

e im

prov

emen

ts to

ou

r sa

les

and

trad

ing

prac

tices

and

rela

ted

com

mun

i-ca

tions

. We

expe

ct o

ur s

ales

and

trad

ing

pers

onne

l not

on

ly to

trea

t cus

tom

ers

fair

ly b

ut to

act

in a

man

ner

that

su

ppor

ts w

ell-f

unct

ioni

ng, t

rans

pare

nt m

arke

ts.

We

reco

gniz

ed th

at e

nhan

cing

mar

ket c

ondu

ct w

ould

re

quire

usi

ng m

ultip

le p

reve

ntiv

e an

d de

tect

ive

leve

rs

in a

coo

rdin

ated

way

. For

exa

mpl

e, th

e re

view

took

into

co

nsid

erat

ion

vari

ous

mea

ns to

est

ablis

h in

form

atio

n ba

rrie

rs; c

ondu

ct c

omm

unic

atio

ns a

nd tr

ansa

ctio

n su

rvei

llanc

e; a

dopt

pol

icie

s; im

plem

ent t

rain

ing;

and

in

corp

orat

e en

hanc

ed s

uper

visi

on, c

ompe

nsat

ion

and

disc

losu

re p

ract

ices

.

In th

e fir

st p

hase

of t

he re

view

, the

bus

ines

s en

hanc

ed

info

rmat

ion

barr

iers

by

impl

emen

ting

new

pol

icie

s ar

ound

ele

ctro

nic

chat

and

laun

ched

an

effor

t to

incr

ease

and

impr

ove

com

mun

icat

ions

gui

delin

es a

nd

surv

eilla

nce

of c

hat a

nd e

mai

l. In

the

seco

nd p

hase

, we

are

carr

ying

out

a re

view

of i

nfor

mat

ion

flow

s in

the

Mar

kets

bus

ines

ses,

furt

her

refin

ing

elec

tron

ic c

hat

guid

elin

es, c

ontin

uing

enh

ance

men

t of s

urve

illan

ce a

nd

prio

ritiz

ing

othe

r is

sues

for

revi

ew.

The

proj

ect s

eeks

to id

entif

y ce

rtai

n pe

r se

pro

hibi

ted

com

mun

icat

ions

and

set

fort

h pr

inci

ples

gov

erni

ng

perm

itted

com

mun

icat

ions

— in

clud

ing

info

rmat

ion

to

be s

hare

d on

a n

eed-

to-k

now

bas

is a

nd o

nly

for

legi

t-im

ate

busi

ness

pur

pose

s, s

uch

as tr

ade

exec

utio

n or

cl

arifi

catio

n of

ope

ratio

nal d

etai

ls. O

ur e

ffort

s ov

er th

e pa

st y

ear

incl

ude:

glob

al g

over

nanc

e fr

amew

ork.

The

com

mitt

ee is

ch

arge

d w

ith s

ettin

g po

licy

and

stan

dard

s an

d cr

eatin

g an

ope

ratin

g m

odel

to s

uppo

rt a

glo

bal

com

mun

icat

ions

sur

veill

ance

pro

gram

. The

co

mm

ittee

als

o is

inte

grat

ing

curr

ent p

ilot p

roje

cts

and

iden

tifyi

ng te

chno

logy

opt

ions

that

sup

port

en

hanc

emen

ts a

nd a

targ

et-s

tate

vis

ion

adde

d Co

mpl

ianc

e su

rvei

llanc

e em

ploy

ees

glob

ally

th

roug

h th

e se

cond

and

third

qua

rter

s of

201

4

-no

logy

for

surv

eilla

nce

by p

artic

ipat

ing

in a

pilo

t as

sess

men

t exp

ecte

d to

be

com

plet

ed b

y m

id-2

015

vend

ors

arou

nd c

urre

nt a

nd fu

ture

ava

ilabi

lity

of

enha

nced

tool

s to

mon

itor

chat

room

par

ticip

atio

n

Addi

tiona

lly, i

n De

cem

ber

2013

, the

CIB

impl

emen

ted

a po

licy

that

pro

hibi

ts s

taff

from

par

ticip

atin

g in

ele

c-tr

onic

cha

ts o

r in

stan

t mes

sagi

ng g

roup

s w

ith tw

o or

m

ore

othe

r ba

nks/

deal

ers.

The

pro

hibi

tion

appl

ies

to

com

mun

icat

ions

with

thir

d-pa

rty

trad

ing

desk

s th

at a

re

com

petit

ors

or m

arke

t-m

aker

s, a

s w

ell a

s br

oker

s or

in

ter-

deal

er b

roke

rs.

FIR

ST L

INE

OF

DEF

ENSE

HO

W W

E D

O B

USI

NES

S —

OU

R C

ON

TRO

L EN

VIR

ON

MEN

T34 Ca

se s

tudy

: Cyb

erse

curi

ty

Defe

ndin

g th

e in

form

atio

n of

our

cus

tom

ers,

em

ploy

ees

and

the

com

pany

’s cy

ber

asse

ts is

of p

aram

ount

impo

r-ta

nce.

Rec

ent e

vent

s, b

oth

at th

e co

mpa

ny a

nd a

t oth

er

larg

e co

rpor

atio

ns, d

emon

stra

te th

e in

crea

sing

impa

ct

and

risk

from

ext

erna

l and

inte

rnal

thre

ats.

Impo

rtan

tly,

to d

ate,

cyb

er a

ttac

ks o

n JP

Mor

gan

Chas

e by

mal

icio

us

acto

rs h

ave

not r

esul

ted

in m

ater

ial h

arm

to o

ur

cust

omer

s an

d ha

ve n

ot h

ad a

mat

eria

l adv

erse

effe

ct

on o

ur re

sults

or

oper

atio

ns.

We

have

est

ablis

hed

a cy

ber d

efen

se s

trat

egy

and

firm

- w

ide

cybe

rsec

urity

pro

gram

bui

lt on

five

key

prin

cipl

es:

cybe

r ac

tivity

-m

ent a

nd th

roug

hout

the

cybe

rspa

ce e

cosy

stem

We

devo

te s

igni

fican

t res

ourc

es to

the

firm

wid

e cy

ber-

secu

rity

prog

ram

to p

rote

ct th

e co

mpa

ny’s

com

pute

r sy

stem

s, s

oftw

are,

net

wor

ks a

nd o

ther

tech

nolo

gy a

sset

s ag

ains

t att

empt

s by

third

par

ties

to o

btai

n un

auth

oriz

ed

acce

ss to

con

fiden

tial c

ompa

ny a

nd c

usto

mer

info

rma-

tion,

des

troy

dat

a, d

isru

pt o

r deg

rade

ser

vice

, sab

otag

e sy

stem

s or

cau

se o

ther

dam

age.

By

the

end

of 2

014,

the

com

pany

will

hav

e sp

ent m

ore

than

$25

0 m

illio

n an

nual

ly

and

will

hav

e ab

out 1

,000

peo

ple

focu

sed

on c

yber

secu

-rit

y. W

e pl

an to

gro

w th

ese

effor

ts o

ver t

he c

omin

g ye

ars.

Foun

datio

nal i

nitia

tives

with

in th

e pr

ogra

m in

clud

e:

prot

ectin

g th

e cu

stom

er; p

rote

ctin

g th

e co

mpa

ny’s

core

sy

stem

s; e

ncry

ptio

n; id

entit

y an

d ac

cess

man

agem

ent;

asse

t man

agem

ent;

and

build

ing

a se

curi

ty c

ultu

re. O

ur

Prot

ectin

g th

e Co

mpa

ny’s

Core

Sys

tem

s in

itiat

ive

is a

ce

ntra

l com

pone

nt o

f our

long

-ter

m e

ffort

s. W

e ha

ve

esta

blis

hed

an a

sses

smen

t fra

mew

ork

to id

entif

y cr

itica

l bu

sine

ss s

ervi

ces

with

hig

h se

nsiti

vity

to c

yber

thre

ats,

id

entif

y ri

sks

and

asse

ss e

nhan

cem

ent o

ppor

tuni

ties,

an

d ex

ecut

e re

med

iatio

n.

In a

dditi

on to

our

long

-ter

m e

ffort

s, w

e ar

e ta

king

oth

er

step

s to

impr

ove

our c

yber

secu

rity

capa

bilit

ies,

incl

udin

g:

prov

ide

over

sigh

t and

gui

danc

e to

our

cyb

erse

-cu

rity

pro

gram

thro

ugh

wee

kly

upda

tes

with

the

com

pany

’s C

hief

Ope

ratin

g O

ffice

r an

d th

e cr

eatio

n of

a C

yber

secu

rity

Exe

cutiv

e Co

unci

l, w

hich

mee

ts

on a

mon

thly

bas

is a

nd is

com

pris

ed o

f bus

ines

s,

cont

rol a

nd te

chno

logy

lead

ers

Ope

ratio

ns C

ente

rs in

our

regi

onal

hea

dqua

rter

s in

As

ia, E

urop

e an

d th

e Un

ited

Stat

es, p

rovi

ding

poi

nts

of c

oord

inat

ion

for

iden

tifyi

ng th

reat

s, e

xecu

ting

resp

onse

pro

cedu

res

and

coor

dina

ting

our

glob

al

Cybe

rsec

urity

ope

ratio

ns

initi

ativ

e to

hel

p us

enh

ance

our

sec

urity

pra

ctic

es,

with

a p

artic

ular

focu

s on

mul

tifac

tor

auth

entic

a-tio

n, s

ecur

e se

rver

bui

lds,

acc

ess

self-

atte

stat

ion,

pe

rim

eter

lock

dow

n, v

ulne

rabi

lity

rem

edia

tion

and

info

rmat

ion

tech

nolo

gy r

isk

exce

ptio

n

self-

asse

ssm

ent p

roce

sses

with

in th

e bu

sine

sses

We

reco

gniz

e th

at c

yber

secu

rity

nee

ds to

be

an o

ngoi

ng

effor

t and

bel

ieve

our

mul

tifac

eted

app

roac

h of

bot

h sh

ort-

and

long

-ter

m p

rogr

ams

will

ena

ble

us to

pro

tect

th

e co

mpa

ny to

day

and

be fl

exib

le to

add

ress

evo

lvin

g th

reat

s in

the

futu

re.

34H

OW

WE

DO

BU

SIN

ESS

— O

UR

CO

NTR

OL

ENV

IRO

NM

ENT

FIR

ST L

INE

OF

DEF

ENSE

HO

W W

E D

O B

USI

NES

S —

OU

R C

ON

TRO

L EN

VIR

ON

MEN

T35

Suit

abili

ty

In A

sset

Man

agem

ent’s

Glo

bal W

ealth

Man

agem

ent

busi

ness

, an

impo

rtan

t con

side

ratio

n w

hen

advi

sing

cl

ient

s is

the

suita

bilit

y an

d ap

prop

riat

enes

s of

reco

m-

men

ded

inve

stm

ents

. Tha

t is

why

our

adv

isor

s pe

rfor

m

and

docu

men

t a c

lient

sui

tabi

lity

asse

ssm

ent t

hat

dete

rmin

es if

our

bro

kera

ge, a

dvis

ory

and

inve

stm

ent

man

agem

ent s

ervi

ces

are

suita

ble

for

that

par

ticul

ar

clie

nt. T

he b

usin

ess’

sui

tabi

lity

fram

ewor

k ha

s be

en

enha

nced

dur

ing

the

past

sev

eral

yea

rs a

nd in

clud

es:

clie

nt’s

risk

tole

ranc

e (e

.g.,

the

clie

nt’s

pers

onal

co

mfo

rt le

vel i

n ta

king

ris

ks),

as w

ell a

s ri

sk c

apac

ity

(e.g

., th

e cl

ient

’s fin

anci

al a

bilit

y to

bea

r a

loss

)

incl

udes

eva

luat

ing

the

com

plex

ity o

f the

pro

duct

an

d its

leve

l of r

isk

addi

tiona

l lev

el o

f che

cks

and

bala

nces

Inve

stin

g in

tech

nolo

gy

Tech

nolo

gy is

a c

ritic

al to

ol in

enh

anci

ng o

ur c

ontr

ol

effor

ts, e

nabl

ing

us to

aut

omat

e pr

evio

usly

man

ual

proc

esse

s an

d co

ntro

ls to

red

uce

com

plex

ity a

nd

impr

ove

accu

racy

. In

addi

tion

to in

vest

men

ts m

ade

by

cont

rol f

unct

ions

, eac

h lin

e of

bus

ines

s ha

s in

vest

ed

sign

ifica

ntly

in im

prov

ing

cont

rol-r

elat

ed te

chno

logy

. Sp

ecifi

cally

, the

line

s of

bus

ines

s ar

e im

plem

entin

g si

gnifi

cant

tech

nolo

gy im

prov

emen

ts r

elat

ed to

AM

L an

d KY

C pr

ogra

ms,

incl

udin

g:

all c

lient

s, ta

ilore

d to

the

spec

ific

char

acte

rist

ics,

ri

sk p

rofil

es, i

nfor

mat

ion

requ

irem

ents

and

eva

l-ua

tion

crite

ria

of d

iffer

ent c

lient

type

s. T

he n

ew

KYC

syst

ems

also

incl

ude

acco

unt a

nd p

rodu

ct d

ue

dilig

ence

for

risk

ier

prod

uct t

ypes

and

an

Offi

ce o

f Fo

reig

n As

sets

Con

trol

onb

oard

ing

ques

tionn

aire

activ

ity-s

peci

fic tr

igge

rs to

esc

alat

e ce

rtai

n si

tuat

ions

to

KYC

and

GFC

C ex

pert

s fo

r fur

ther

revi

ew a

s ne

eded

. Th

is a

lso

incl

udes

cha

nnel

s al

low

ing

our f

ront

-line

em

ploy

ees

to ro

ute

info

rmat

ion

rega

rdin

g po

tent

ially

su

spic

ious

act

ivity

to o

ur In

vest

igat

ions

team

syst

ems

to e

nhan

ce c

ompl

ianc

e w

ith o

ur re

gula

tory

re

port

ing

oblig

atio

ns

-ac

tion

mon

itori

ng a

nd s

anct

ions

scr

eeni

ng. F

or

exam

ple,

inst

ead

of h

avin

g m

ultip

le s

epar

ate

sanc

tions

scr

eeni

ng s

olut

ions

, the

line

s of

bus

ines

s w

ill u

se th

e fir

mw

ide

sanc

tions

scr

eeni

ng u

tility

, w

hich

bri

ngs

cons

iste

ncy

and

incr

ease

d tr

ansp

aren

cy

to s

anct

ions

scr

eeni

ng

FIR

ST L

INE

OF

DEF

ENSE

HO

W W

E D

O B

USI

NES

S —

OU

R C

ON

TRO

L EN

VIR

ON

MEN

T36 To

faci

litat

e be

tter

mon

itori

ng a

nd m

anag

emen

t of t

he

com

pany

’s co

ntro

l env

ironm

ent,

Ove

rsig

ht &

Con

trol

has

es

tabl

ishe

d a

tech

nolo

gy-e

nabl

ed C

ontr

ols

Room

at o

ur

corp

orat

e he

adqu

arte

rs. T

he C

ontr

ols

Room

mai

ntai

ns a

re

posi

tory

of fi

rmw

ide

cont

rol-r

elat

ed in

form

atio

n an

d en

able

s ra

pid

acce

ss to

rele

vant

dat

a, re

port

ing

capa

bil-

ities

and

sop

hist

icat

ed a

naly

tics.

It h

as a

cen

tral

team

of

data

sci

entis

ts a

nd re

port

ing

anal

ysts

.

Sim

plif

ying

and

de-

risk

ing

our

busi

ness

Our

line

s of

bus

ines

s ha

ve u

nder

take

n an

agg

res-

sive

pro

gram

to s

impl

ify a

nd d

e-ri

sk o

ur b

usin

ess.

Sp

ecifi

cally

, our

bus

ines

ses

look

ed to

elim

inat

e pr

oduc

ts

and

serv

ices

that

are

not

ess

entia

l to

serv

ing

our

cust

omer

s or

pro

mot

ing

our

busi

ness

es a

nd to

dis

con-

tinue

cer

tain

bus

ines

s w

ith s

elec

t clie

nts.

Thi

s en

able

s ou

r bu

sine

sses

to fo

cus

on th

e m

ost i

mpo

rtan

t act

iviti

es

for

our

core

clie

nts

and

bett

er m

anag

e ou

r op

erat

iona

l, re

gula

tory

and

lega

l ris

ks.

To d

eter

min

e ho

w to

sim

plify

and

de-

risk

our

bus

ines

s,

each

line

of b

usin

ess

cond

ucte

d du

e di

ligen

ce o

n its

po

rtfo

lio to

revi

ew a

var

iety

of f

acto

rs, i

nclu

ding

:

cust

omer

s fo

r whi

ch m

oney

laun

derin

g ris

k is

too

high

for w

hich

val

ue to

our

cus

tom

ers

does

not

mee

t cos

ts,

incl

udin

g co

mpl

ianc

e an

d ris

k m

anag

emen

t cos

ts

Exam

ples

of d

e-ris

king

thro

ugh

the

elim

inat

ion

of

prod

ucts

and

ser

vice

s th

at a

re n

ot c

ore

to o

ur c

usto

mer

s or

that

hav

e ou

tsiz

ed o

pera

tiona

l ris

k in

clud

e:

Exam

ples

of d

e-ri

skin

g th

roug

h cl

ient

sel

ectio

n an

d di

scon

tinua

tion

of c

erta

in b

usin

ess

with

sel

ect c

lient

s in

clud

e:

clie

nts

expo

sed

pers

ons

Impo

rtan

tly, w

e do

not

bel

ieve

thes

e ch

ange

s w

ill

adve

rsel

y aff

ect o

ur c

ore

fran

chis

es. W

hile

dev

elop

ing

and

pilo

ting

new

pro

duct

s, s

ervi

ces

and

busi

ness

line

s is

a c

ritic

al p

art o

f wha

t we

do, s

o, to

o, is

the

proc

ess

of

regu

larl

y an

d ca

refu

lly p

runi

ng th

ose

item

s th

at h

ave

not m

et o

ur e

xpec

tatio

ns o

r th

at d

o no

t fit w

ith o

ur

cont

rol e

nviro

nmen

t or

busi

ness

str

ateg

y.

FIR

ST L

INE

OF

DEF

ENSE

HO

W W

E D

O B

USI

NES

S —

OU

R C

ON

TRO

L EN

VIR

ON

MEN

T37

Case

stu

dy: E

nhan

ced

cont

rols

for

payd

ay le

ndin

g

JPM

orga

n Ch

ase

does

not

eng

age

in th

e bu

sine

ss o

f pa

yday

lend

ing.

How

ever

, som

e of

our

cus

tom

ers

do r

ely

on p

ayda

y lo

ans

— s

mal

l, sh

ort-

term

loan

s th

at u

sual

ly c

arry

a h

igh

inte

rest

rat

e —

from

thir

d-pa

rty

lend

ers

to m

anag

e da

y-to

-day

exp

ense

s an

d em

erge

ncy

finan

cial

nee

ds.

Unfo

rtun

atel

y, s

ome

of th

ese

thir

d-pa

rty

lend

ers

use

unfa

ir a

nd a

busi

ve c

olle

ctio

n pr

actic

es th

at c

an c

ause

ou

r cu

stom

ers

finan

cial

har

dshi

p. F

or e

xam

ple,

lend

ers

may

sub

mit

pote

ntia

lly u

naut

hori

zed

tran

sact

ions

to

a cu

stom

ers’

pri

mar

y ba

nk a

nd/o

r de

bit f

unds

from

a

bank

acc

ount

mul

tiple

tim

es in

a d

ay, w

hich

can

resu

lt in

m

ultip

le re

turn

ed it

em fe

es.

Bank

s ca

me

unde

r cr

itici

sm fr

om re

gula

tors

and

co

nsum

er a

dvoc

acy

grou

ps fo

r no

t lim

iting

som

e pa

yday

le

nder

s’ c

olle

ctio

n pr

actic

es. A

s a

resu

lt, w

e re

view

ed

our

polic

ies,

sys

tem

s an

d pr

oces

ses

to d

ecre

ase

finan

cial

bur

dens

on

our

cust

omer

s an

d hi

nder

pay

day

lend

ers’

abi

lity

to e

ngag

e in

pre

dato

ry c

olle

ctio

n pr

actic

es. S

ome

of th

e im

prov

emen

ts w

e ha

ve m

ade

are

disc

usse

d be

low

.

Elim

inat

ing

mul

tipl

e re

turn

ed it

em fe

es

In th

e pa

st, w

hen

payd

ay le

nder

s at

tem

pted

to d

ebit

fund

s fr

om a

n ac

coun

t mul

tiple

tim

es in

one

day

, an

acco

unt w

as c

harg

ed a

max

imum

of t

hree

retu

rned

ite

m fe

es p

er d

ay. W

e re

vise

d ou

r po

licie

s an

d sy

stem

s so

that

acc

ount

s w

ould

be

char

ged

a re

turn

ed it

em fe

e on

ly o

nce

per

mon

th fo

r th

e sa

me

paym

ent r

eque

st.

This

has

resu

lted

in a

34%

dec

reas

e in

tota

l ret

urne

d ite

m fe

es fo

r ou

r cu

stom

ers.

Enha

nced

pol

icy

trai

ning

and

sys

tem

s fo

r st

op

paym

ent r

eque

sts

Our

revi

ew re

veal

ed th

at s

ome

cust

omer

s fo

und

it di

fficu

lt to

initi

ate

stop

pay

men

t req

uest

s an

d th

at p

ayda

y le

nder

s co

uld

avoi

d be

ing

subj

ect t

o a

stop

pay

men

t by

subm

ittin

g tr

ansa

ctio

ns o

f var

ying

am

ount

s. A

s a

resu

lt, w

e m

ade

it ea

sier

for

cust

omer

s to

initi

ate

stop

pay

men

ts a

nd im

prov

ed o

ur s

yste

ms

by:

on e

xist

ing

polic

ies

for

taki

ng a

nd p

roce

ssin

g st

op

paym

ent r

eque

sts

by a

mer

chan

t sub

ject

to a

sto

p pa

ymen

t req

uest

w

ould

be

reje

cted

eve

n w

here

the

tran

sact

ion

amou

nts

vari

ed

Sinc

e th

ese

chan

ges,

sto

p pa

ymen

t req

uest

s ha

ve

incr

ease

d by

app

roxi

mat

ely

30%

, and

the

num

ber

of

aut

omat

ed c

lear

ing

hous

e de

bit t

rans

actio

ns

that

wer

e re

turn

ed d

ue to

a s

top

paym

ent r

ose

by

appr

oxim

atel

y 15

0%.

37H

OW

WE

DO

BU

SIN

ESS

— O

UR

CO

NTR

OL

ENV

IRO

NM

ENT

FIR

ST L

INE

OF

DEF

ENSE

HO

W W

E D

O B

USI

NES

S —

OU

R C

ON

TRO

L EN

VIR

ON

MEN

T38H

OW

WE

DO

BU

SIN

ESS

— O

UR

CO

NTR

OL

ENV

IRO

NM

ENT

38

NAC

HA

init

iati

ves

We

are

wor

king

clo

sely

with

the

Nat

iona

l Aut

omat

ed

Clea

ring

Hou

se A

ssoc

iatio

n (N

ACH

A) to

dev

elop

new

st

anda

rds

to a

ddre

ss c

once

rns

rela

ting

to p

ayda

y le

nder

pra

ctic

es. E

nhan

cem

ents

in w

hich

we

have

bee

n in

volv

ed in

clud

e:

will

allo

w N

ACH

A to

initi

ate

an in

quir

y pr

oces

s in

to

orig

inat

ors

that

hav

e ex

cess

ive

retu

rns

entit

ies

that

hav

e un

auth

oriz

ed a

utom

ated

cle

arin

g ho

use

debi

t tra

nsac

tions

retu

rned

We

are

oppo

sed

to u

nfai

r, ab

usiv

e or

ille

gal a

ctiv

ity

by p

ayda

y le

nder

s. N

ot a

ll pa

yday

lend

ers

enga

ge in

th

ese

pred

ator

y ac

tiviti

es, b

ut fo

r th

ose

that

do,

we

are

com

mitt

ed to

hel

p pr

otec

t our

cus

tom

ers.

Acco

unt c

losu

re w

ith

a pe

ndin

g tr

ansa

ctio

n an

d/or

a n

egat

ive

bala

nce

Unde

r ou

r pr

ior

polic

y, a

cus

tom

er w

as n

ot a

ble

to c

lose

hi

s or

her

acc

ount

if, f

or e

xam

ple,

the

acco

unt h

ad a

pe

ndin

g tr

ansa

ctio

n or

a n

egat

ive

bala

nce.

As

a re

sult,

pa

yday

lend

ers

coul

d co

ntin

ue to

sub

mit

paym

ent

requ

ests

to a

n ac

coun

t a c

usto

mer

was

tryi

ng to

clo

se,

whi

ch le

d to

add

ition

al re

turn

ed it

em fe

es a

nd th

e cu

stom

er’s

cont

inue

d in

abili

ty to

clo

se a

n ac

coun

t.

To m

ake

it ea

sier

for

cust

omer

s to

clo

se a

n ac

coun

t, ou

r sy

stem

s an

d po

licie

s w

ere

revi

sed

so th

at a

ccou

nts

can

be c

lose

d ev

en if

ther

e is

an

open

or

pend

ing

char

ge

or if

an

acco

unt h

as a

neg

ativ

e ba

lanc

e. A

fter

thes

e ch

ange

s, a

ppro

xim

atel

y 15

% to

20%

of t

he a

ccou

nts

clos

ed e

ach

mon

th h

ave

a pe

ndin

g tr

ansa

ctio

n or

a

nega

tive

bala

nce

at th

e tim

e a

cust

omer

requ

ests

cl

osin

g an

acc

ount

.

HO

W W

E D

O B

USI

NES

S —

OU

R C

ON

TRO

L EN

VIR

ON

MEN

T3838

HO

W W

E D

O B

USI

NES

S —

OU

R C

ON

TRO

L EN

VIR

ON

MEN

TFI

RST

LIN

E O

F D

EFEN

SE

HO

W W

E D

O B

USI

NES

S —

OU

R C

ON

TRO

L EN

VIR

ON

MEN

T39

Build

ing

and

stre

ngth

enin

g O

vers

ight

&

Cont

rol

Ove

rsig

ht &

Con

trol

was

est

ablis

hed

in 2

012

to b

ring

gr

eate

r fo

cus

and

disc

iplin

e to

our

con

trol

effo

rts

both

w

ithin

and

acr

oss

our

lines

of b

usin

ess,

cor

pora

te

func

tions

and

regi

ons.

The

com

pany

has

dev

oted

su

bsta

ntia

l res

ourc

es to

form

aliz

ing

the

Ove

rsig

ht &

Co

ntro

l fun

ctio

n. T

he fu

nctio

n w

ill h

ave

mor

e th

an 2

,400

em

ploy

ees

by th

e en

d of

201

4 th

roug

h a

com

bina

tion

of th

e re

depl

oym

ent o

f exi

stin

g st

aff d

oing

this

type

of

wor

k an

d ne

w h

ires.

The

Chie

f Con

trol

Offi

cer

repo

rts

to th

e Ch

ief O

pera

ting

Offi

cer

of th

e co

mpa

ny a

nd p

artn

ers

clos

ely

with

the

Chie

f Com

plia

nce

Offi

cer,

Chie

f Ris

k O

ffice

r, Ge

nera

l Co

unse

l and

bus

ines

s he

ads,

am

ong

othe

rs. L

ine

of

busi

ness

and

cor

pora

te fu

nctio

n Co

ntro

l Offi

cers

dua

lly

repo

rt in

to th

eir

line

of b

usin

ess

or c

orpo

rate

func

tion

and

the

Chie

f Con

trol

Offi

cer.

Ove

rsig

ht &

Con

trol

als

o in

clud

es s

ever

al c

entr

al te

ams

repo

rtin

g to

the

Chie

f Co

ntro

l Offi

cer,

incl

udin

g th

e Co

ntro

ls R

oom

team

, the

Su

perv

isor

y Re

gula

tory

Str

ateg

y te

am a

nd th

e Pr

oces

s &

Cont

rol O

vers

ight

team

.

Area

s of

focu

s fo

r O

vers

ight

& C

ontr

ol in

clud

e:

End-

to-e

nd o

vers

ight

of i

ssue

man

agem

ent —

Id

entifi

catio

n, m

easu

rem

ent,

mon

itori

ng a

nd

man

agem

ent o

f ris

ks a

nd s

tren

gthe

ning

of c

ontr

ols

and

self-

iden

tifica

tion

proc

esse

s

Stan

dard

ized

rep

orti

ng a

nd a

naly

sis

of is

sues

for

tren

ds a

nd p

oten

tial

impa

ct to

oth

er b

usin

esse

s an

d fu

ncti

ons

— R

egul

ar re

port

ing

and

esca

latio

n of

con

trol

-rel

ated

issu

es in

the

lines

of b

usin

ess,

fu

nctio

ns a

nd re

gion

s an

d co

nsid

erat

ion

of p

oten

tial

appl

icab

ility

to o

ther

rele

vant

are

as

Sust

aina

ble

rem

edia

tion

(inc

ludi

ng r

egul

ator

y is

sues

) — D

evel

opm

ent o

f a c

onsi

sten

t app

roac

h to

(i) r

esol

ve c

ontr

ol is

sues

in a

tim

ely

man

ner,

(ii)

addr

ess

root

cau

ses

(not

sym

ptom

s), a

nd (i

ii) e

nsur

e ac

tions

take

n ar

e su

stai

nabl

e ov

er th

e lo

ng te

rm

Maj

or c

ontr

ol p

rogr

ams

— Im

plem

enta

tion

of

risk

and

con

trol

sel

f-as

sess

men

ts (d

escr

ibed

be

low

), as

wel

l as

eith

er d

irect

ow

ners

hip

or p

rogr

am

over

sigh

t of t

he c

ompa

ny’s

ente

rpris

e-w

ide

prog

ram

s (d

escr

ibed

on

page

30)

, suc

h as

our

New

Bus

ines

s In

itiat

ive

Appr

oval

pro

cess

and

thir

d-pa

rty

over

sigh

t, am

ong

othe

rs

Cont

rol g

over

nanc

e m

odel

— E

xecu

tion

of th

is m

odel

w

ithin

the

lines

of b

usin

ess,

func

tions

and

regi

ons

Impl

emen

ting

Ris

k an

d Co

ntro

l Se

lf-As

sess

men

ts

Cont

rol O

ffice

rs h

ave

impl

emen

ted

a co

mm

on r

isk

and

cont

rol s

elf-a

sses

smen

t pro

cess

, whi

ch w

as d

esig

ned

by

Risk

as

part

of a

bro

ader

ope

ratio

nal r

isk

man

agem

ent

fram

ewor

k. T

he C

ontr

ols

Room

with

in O

vers

ight

&

Cont

rol f

acili

tate

s co

nsis

tent

impl

emen

tatio

n of

ris

k an

d co

ntro

l sel

f-ass

essm

ents

by

Cont

rol O

ffice

rs. T

he

prog

ram

pro

vide

s co

mm

on s

tand

ards

for

all l

ines

of

busi

ness

and

func

tions

to:

plac

e to

miti

gate

key

risk

s

loss

es, o

pera

tiona

l fai

lure

s, re

gula

tory

impa

ct o

r in

tern

al p

olic

y vi

olat

ions

-ne

sses

, with

spe

cific

acc

ount

abili

ty a

nd re

spon

sibi

lity

assi

gned

for

timel

y re

solu

tion

impr

ovem

ent p

rior

ities

The

asse

ssm

ent o

f ris

ks a

nd c

ontr

ols

is a

n on

goin

g pr

oces

s th

at re

quire

s fo

rmal

revi

ew a

t lea

st a

nnua

lly.

FIR

ST L

INE

OF

DEF

ENSE

HO

W W

E D

O B

USI

NES

S —

OU

R C

ON

TRO

L EN

VIR

ON

MEN

T40 CO

NTR

OL

FUN

CTIO

NS

Acro

ss th

e co

mpa

ny, w

e ha

ve m

ade

subs

tant

ial i

nves

t-m

ents

and

tran

sfor

mat

ive

chan

ges

aim

ed a

t str

engt

h-en

ing

our

cont

rol f

unct

ions

. Our

end

-to-

end

cont

rol

agen

da fo

cuse

s on

ear

ly is

sue

iden

tifica

tion,

sw

ift

esca

latio

n an

d su

stai

nabl

e re

med

iatio

n. In

add

ition

to

Ove

rsig

ht &

Con

trol

, the

follo

win

g fo

ur fu

nctio

ns a

re

part

of o

ur c

ontr

ol fr

amew

ork:

Ove

rsig

ht &

Con

trol

is d

escr

ibed

on

prev

ious

pag

es in

this

se

ctio

n. C

onsi

sten

t with

its

wor

k as

par

t of t

he b

usin

esse

s,

Over

sigh

t & C

ontr

ol h

as C

ontr

ol O

ffice

rs e

mbe

dded

in

each

of t

he fu

nctio

ns. T

hey

repo

rt d

irect

ly to

thei

r res

pec-

tive

func

tion

and

have

an

addi

tiona

l rep

ortin

g lin

e to

the

com

pany

’s Ch

ief C

ontr

ol O

ffice

r.

The

follo

win

g pa

ges

desc

ribe

act

ions

we

have

take

n to

en

hanc

e Ri

sk, F

inan

ce, C

ompl

ianc

e an

d Le

gal.

Risk

Risk

is a

n in

here

nt p

art o

f our

com

pany

’s bu

sine

ss a

ctiv

-iti

es. W

hen

we

exte

nd a

con

sum

er o

r co

mm

erci

al lo

an,

advi

se c

usto

mer

s on

thei

r in

vest

men

t dec

isio

ns, m

ake

mar

kets

in s

ecur

ities

, or

cond

uct a

ny n

umbe

r of

oth

er

serv

ices

or

activ

ities

, we

take

on

som

e de

gree

of r

isk.

W

e ai

m to

man

age

and

bala

nce

risk

in a

man

ner

that

se

rves

the

inte

rest

s of

our

clie

nts,

cus

tom

ers

and

shar

e-ho

lder

s, a

s w

ell a

s th

e he

alth

of t

he fi

nanc

ial s

yste

m.

The

com

pany

’s ap

proa

ch to

ris

k m

anag

emen

t cov

ers

a br

oad

spec

trum

of r

isk

area

s, s

uch

as c

redi

t, m

arke

t, liq

uidi

ty, m

odel

, str

uctu

ral i

nter

est r

ate,

pri

ncip

al,

coun

try,

ope

ratio

nal,

fiduc

iary

and

repu

tatio

n.

We

belie

ve th

at e

ffect

ive

risk

man

agem

ent r

equi

res

acce

ptan

ce o

f res

pons

ibili

ty b

y al

l ind

ivid

uals

with

in th

e co

mpa

ny, o

wne

rshi

p of

risk

man

agem

ent w

ithin

eac

h lin

e of

bus

ines

s an

d fir

mw

ide

stru

ctur

es fo

r ris

k go

vern

ance

. Th

e co

mpa

ny’s

risk

man

agem

ent f

ram

ewor

k is

inte

nded

to

cre

ate

a cu

lture

of t

rans

pare

ncy,

aw

aren

ess

and

pers

onal

resp

onsi

bilit

y th

roug

h re

port

ing,

col

labo

ratio

n,

disc

ussi

on, e

scal

atio

n an

d sh

arin

g of

info

rmat

ion.

Org

aniz

atio

n

The

Risk

org

aniz

atio

n is

man

aged

on

a fir

mw

ide

basi

s. It

op

erat

es in

depe

nden

tly fr

om th

e re

venu

e-ge

nera

ting

busi

-ne

sses

, whi

ch e

nabl

es it

to p

rovi

de c

redi

ble

chal

leng

e to

th

em. O

ur C

hief

Ris

k Offi

cer (

CRO)

is th

e he

ad o

f the

Ris

k or

gani

zatio

n an

d is

resp

onsi

ble

for t

he o

vera

ll di

rect

ion

of

Risk

ove

rsig

ht.

The

CRO

is s

uppo

rted

by

indi

vidu

als

and

orga

niza

tions

th

at a

lign

to li

nes

of b

usin

ess

and

func

tions

, as

wel

l as

oth

ers

that

alig

n to

spe

cific

ris

k ty

pes.

The

aim

of

this

str

uctu

re is

to a

ssig

n ow

ners

hip

and

acco

unt-

abili

ty w

ithin

the

busi

ness

are

as w

hile

dis

sem

inat

ing

best

pra

ctic

es th

roug

h de

ep s

ubje

ct m

atte

r ex

pert

ise.

O

ver

the

past

few

yea

rs, w

e ha

ve m

ade

a nu

mbe

r of

en

hanc

emen

ts to

our

org

aniz

atio

nal s

truc

ture

and

st

affing

, inc

ludi

ng:

firm

wid

e Ri

sk fu

nctio

ns a

nd w

ithin

the

line

of

busi

ness

Ris

k ar

eas.

Exa

mpl

es in

clud

e:

— A

ppoi

ntin

g ex

ecut

ives

to o

vers

ee m

arke

t ris

k,

mod

el r

isk

and

fiduc

iary

ris

k ac

ross

the

com

pany

— C

reat

ing

or e

xpan

ding

role

s w

ithin

the

line

of

busi

ness

Ris

k ar

eas,

suc

h as

the

appo

intm

ent o

f an

Ope

ratio

nal R

isk

Offi

cer

in e

ach

line

of b

usin

ess

and

the

appo

intm

ent o

f des

igna

ted

indi

vidu

als

to

over

see

fiduc

iary

ris

k in

eac

h lin

e of

bus

ines

s

CON

TRO

L FU

NCT

ION

S

HO

W W

E D

O B

USI

NES

S —

OU

R C

ON

TRO

L EN

VIR

ON

MEN

T41

the

Risk

func

tions

. Exa

mpl

es in

clud

e:

— A

ppoi

ntin

g a

Cont

rol O

ffice

r to

prov

ide

over

sigh

t of

the

cont

rol e

nviro

nmen

t with

in th

e Ri

sk o

rgan

izat

ion

— C

reat

ing

Chie

f Fin

anci

al O

ffice

r and

Chi

ef

Info

rmat

ion

Office

r rol

es th

at s

pan

Risk

, Fin

ance

an

d Te

chno

logy

in o

rder

to s

tren

gthe

n th

e st

rate

gic

busi

ness

sup

port

, inf

rast

ruct

ure

and

cont

rol

fram

ewor

k ac

ross

Ris

k, F

inan

ce a

nd T

echn

olog

y

— A

ppoi

ntin

g a

firm

wid

e Ch

ief D

ata

Offi

cer,

as w

ell

as a

Dat

a O

ffice

r fo

r ea

ch li

ne o

f bus

ines

s to

dr

ive

firm

wid

e po

licy,

con

sist

ent p

roce

dure

s an

d co

mm

on s

tand

ards

for

data

man

agem

ent

Gove

rnan

ce

The

inde

pend

ent s

tatu

re o

f the

Ris

k or

gani

zatio

n is

su

ppor

ted

by a

gov

erna

nce

stru

ctur

e th

at p

rovi

des

for

esca

latio

n of

ris

k is

sues

up

to s

enio

r m

anag

emen

t and

th

e Bo

ard.

We

have

take

n si

gnifi

cant

ste

ps to

str

engt

hen

our

risk

gov

erna

nce

prac

tices

and

str

uctu

re, i

nclu

ding

:

shar

ed w

ith th

e Bo

ard

of D

irect

ors’

Ris

k Po

licy

Com

mitt

ee a

nd e

nhan

cing

eng

agem

ent w

ith th

e m

embe

rs o

f the

com

mitt

ee. M

embe

rs o

f the

Ris

k or

gani

zatio

n m

eet w

ith th

e Bo

ard

of D

irect

ors’

Ris

k Po

licy

Com

mitt

ee o

ften

to p

rovi

de u

pdat

es o

n ke

y ri

sk is

sues

. In

thei

r ro

le a

s pa

rt o

f the

firs

t lin

e of

de

fens

e, e

ach

line

of b

usin

ess

CEO

als

o pa

rtic

ipat

es

duri

ng th

is u

pdat

e to

pro

vide

a b

usin

ess

pers

pect

ive

com

mitt

ee is

the

high

est m

anag

emen

t-le

vel R

isk

com

mitt

ee w

ithin

the

com

pany

and

is c

o-ch

aire

d by

th

e co

mpa

ny’s

CEO

and

CRO

. It s

erve

s as

an

esca

-la

tion

poin

t for

ris

k to

pics

and

issu

es ra

ised

by

its

mem

bers

, the

line

of b

usin

ess

Risk

com

mitt

ees,

and

ot

her

subo

rdin

ate

com

mitt

ees

like

the

Firm

wid

e Co

ntro

l Com

mitt

ee, F

irm

wid

e Fi

duci

ary

Risk

Co

mm

ittee

, Rep

utat

ion

Risk

com

mitt

ees

and

regi

onal

Ri

sk c

omm

ittee

s

to th

e CE

O a

nd to

the

Boar

d of

Dire

ctor

s’ R

isk

Polic

y Co

mm

ittee

(see

pag

e 28

)

Addi

tiona

l inf

orm

atio

n ab

out i

mpr

ovem

ents

to r

isk

gove

rnan

ce is

ava

ilabl

e be

ginn

ing

on p

age

28. T

he

sche

mat

ic o

n pa

ge 2

9 re

flect

s th

e co

mpa

ny’s

ris

k go

vern

ance

str

uctu

re a

nd c

erta

in k

ey m

anag

e-m

ent-

leve

l com

mitt

ees

that

are

pri

mar

ily r

espo

nsib

le

for

key

risk

-rel

ated

func

tions

. The

re a

re a

dditi

onal

co

mm

ittee

s no

t rep

rese

nted

in th

e ch

art (

e.g.

, som

e fu

nctio

nal f

orum

s th

at c

ompr

ise

our

risk

gov

erna

nce

fram

ewor

k) th

at a

lso

are

resp

onsi

ble

for

man

agem

ent

and

over

sigh

t of r

isk.

Risk

app

etit

e

The

risk

app

etite

fram

ewor

k is

a to

ol to

mea

sure

the

com

pany

’s ca

paci

ty to

take

ris

k ag

ains

t its

sta

ted

guid

elin

es. T

he c

ompa

ny’s

over

all r

isk

appe

tite

is e

stab

-lis

hed

by m

anag

emen

t in

acco

rdan

ce w

ith th

e Bo

ard

of

Dire

ctor

s’ R

isk

Appe

tite

polic

y, ta

king

into

con

side

ratio

n th

e co

mpa

ny’s

capi

tal a

nd li

quid

ity p

ositi

ons,

ear

ning

s po

wer

and

div

ersi

fied

busi

ness

mod

el.

Vari

ous

initi

ativ

es h

ave

been

und

erw

ay to

impr

ove

the

com

pany

’s ri

sk a

ppet

ite fr

amew

ork,

incl

udin

g:

proc

esse

s to

info

rm d

ecis

ions

on

sett

ing

the

risk

ap

petit

e

abou

t ris

k ap

petit

e

CON

TRO

L FU

NCT

ION

SH

OW

WE

DO

BU

SIN

ESS

— O

UR

CO

NTR

OL

ENV

IRO

NM

ENT

42 Risk

man

agem

ent a

ppro

ach

by r

isk

area

In it

s ro

le a

s an

org

aniz

atio

n in

depe

nden

t of t

he re

ve-

nue-

gene

ratin

g bu

sine

sses

, the

Ris

k or

gani

zatio

n de

sign

s an

d ov

erse

es a

ris

k m

anag

emen

t fra

mew

ork

acro

ss th

e co

mpa

ny. T

he fo

llow

ing

page

s de

scri

be h

ow

we

have

enh

ance

d ou

r ab

ility

to m

anag

e ri

sk.

Cred

it r

isk

The

com

pany

pro

vide

s cr

edit

to a

var

iety

of c

usto

mer

s,

rang

ing

from

larg

e co

rpor

ate

and

inst

itutio

nal c

lient

s to

in

divi

dual

con

sum

ers

and

smal

l bus

ines

ses.

Cre

dit r

isk

is th

e ri

sk o

f los

s ar

isin

g fr

om th

e de

faul

t of a

cus

tom

er,

clie

nt o

r co

unte

rpar

ty. T

he C

redi

t Ris

k M

anag

emen

t fu

nctio

n id

entifi

es, m

easu

res,

lim

its, m

anag

es a

nd

mon

itors

cre

dit r

isk

acro

ss o

ur b

usin

esse

s.

Rece

nt w

hole

sale

cre

dit r

isk

deve

lopm

ents

incl

ude:

and

limits

acr

oss

all l

ines

of b

usin

ess

in o

rder

to

fost

er b

est p

ract

ices

-w

orks

and

allo

wan

ce p

roce

ss

Rece

nt c

onsu

mer

cre

dit r

isk

deve

lopm

ents

incl

ude:

finan

cial

fore

cast

ing,

incl

udin

g im

prov

ed in

form

atio

n te

chno

logy

and

dat

a in

fras

truc

ture

with

enh

ance

d m

etri

cs a

nd m

onito

ring

Bank

ing

busi

ness

es’ (

e.g.

, Bus

ines

s Ba

nkin

g, D

eale

r Co

mm

erci

al S

ervi

ces)

pol

icie

s an

d pr

actic

es w

ith

Com

mer

cial

Ban

king

Mar

ket r

isk

Mar

ket r

isk

is th

e po

tent

ial f

or a

dver

se c

hang

es in

the

valu

e of

the

com

pany

’s as

sets

and

liab

ilitie

s re

sulti

ng

from

cha

nges

in m

arke

t var

iabl

es. T

he M

arke

t Ris

k fu

nctio

n se

eks

to c

ontr

ol r

isk,

faci

litat

e effi

cien

t ris

k/re

turn

dec

isio

ns, r

educ

e vo

latil

ity in

ope

ratin

g pe

rfor

-m

ance

and

pro

vide

tran

spar

ency

into

the

com

pany

’s m

arke

t ris

k pr

ofile

. We

have

mad

e va

riou

s en

hanc

e-m

ents

to th

e m

arke

t ris

k fr

amew

ork,

incl

udin

g:

prom

ote

cons

iste

ncy

acro

ss th

e co

mpa

ny’s

line

of

busi

ness

Mar

ket R

isk

team

s

to in

clud

e ad

ditio

nal e

scal

atio

n of

age

d or

sig

nific

ant

limit

brea

ches

the

com

pany

Liqu

idit

y ri

sk

Liqu

idity

ris

k m

anag

emen

t is

inte

nded

to e

nsur

e th

at

the

com

pany

has

the

appr

opri

ate

amou

nt, c

ompo

si-

tion

and

teno

r of

fund

ing

and

liqui

dity

in s

uppo

rt o

f its

ass

ets.

The

pri

mar

y ob

ject

ives

of e

ffect

ive

liqui

dity

m

anag

emen

t are

to e

nsur

e th

at th

e co

mpa

ny’s

core

bu

sine

sses

can

mee

t con

trac

tual

and

con

tinge

nt o

blig

a-tio

ns th

roug

h no

rmal

eco

nom

ic c

ycle

s an

d m

arke

t str

ess

even

ts. R

ecen

t im

prov

emen

ts in

clud

e:

Over

sigh

t fun

ctio

n in

to th

e Ri

sk o

rgan

izat

ion,

whi

ch

prov

ides

inde

pend

ent a

sses

smen

t, m

onito

ring,

con

trol

an

d tr

ansp

aren

cy o

f liq

uidi

ty ri

sks

acro

ss th

e co

mpa

ny

CON

TRO

L FU

NCT

ION

S

HO

W W

E D

O B

USI

NES

S —

OU

R C

ON

TRO

L EN

VIR

ON

MEN

T43

incl

udin

g en

hanc

ing

stre

ss te

stin

g as

sum

ptio

ns,

stre

ngth

enin

g th

e co

ntro

l and

gov

erna

nce

mod

el,

and

impr

ovin

g id

entifi

catio

n of

liqu

idity

ris

ks

plat

form

(liq

uidi

ty r

isk

infr

astr

uctu

re) t

o m

ater

i-al

ly e

nhan

ce th

e au

tom

atio

n of

liqu

idity

and

str

ess

test

ing

func

tiona

lity

Mod

el r

isk

The

com

pany

em

ploy

s m

odel

s to

val

ue a

nd m

anag

e fin

anci

al p

rodu

cts,

ass

ess

port

folio

ris

k an

d co

mpu

te

risk

-wei

ghte

d as

sets

, inf

orm

dec

isio

ns a

bout

ext

en-

sion

s of

cre

dit,

and

supp

ort o

r au

tom

ate

trad

ing

and

inve

stm

ent d

ecis

ions

, am

ong

othe

r pu

rpos

es.

For

exam

ple,

val

uatio

n m

odel

s ar

e em

ploy

ed b

y th

e co

mpa

ny to

val

ue c

erta

in fi

nanc

ial i

nstr

umen

ts th

at

othe

rwis

e ca

nnot

be

valu

ed u

sing

quo

ted

pric

es. T

hese

va

luat

ion

mod

els

also

may

be

empl

oyed

as

inpu

ts to

ri

sk m

anag

emen

t mod

els,

incl

udin

g Va

lue-

at-R

isk

(VaR

) an

d ec

onom

ic s

tres

s m

odel

s.

Our

Mod

el R

isk

and

Deve

lopm

ent u

nit p

rovi

des

over

sigh

t of t

he fi

rmw

ide

Mod

el R

isk

polic

y, p

rovi

des

guid

ance

with

resp

ect t

o th

e ap

prop

riat

e us

age

of o

ur

mod

els

and

cond

ucts

inde

pend

ent r

evie

ws

of m

odel

s.

We

are

cont

inui

ng to

str

engt

hen

the

team

and

its

prac

tices

, inc

ludi

ng th

roug

h:

into

Mod

el R

evie

w a

nd G

over

nanc

e fu

nctio

ns

prac

tices

to e

stab

lish

firm

wid

e st

anda

rds

for

mod

el r

isk

man

agem

ent

Stru

ctur

al in

tere

st r

ate

risk

The

com

pany

man

ages

inte

rest

rate

ris

k (i.

e., e

xpos

ure

rela

ted

to c

hang

es in

inte

rest

rate

s as

they

affe

ct o

ur

asse

ts a

nd li

abili

ties)

on

a co

nsol

idat

ed, fi

rmw

ide

basi

s. B

usin

ess

units

effe

ctiv

ely

tran

sfer

thei

r in

tere

st

rate

ris

k to

the

Trea

sury

and

Chi

ef In

vest

men

t Offi

ce

to b

e m

anag

ed c

entr

ally

. The

com

pany

man

ages

the

inte

rest

rate

risk

prim

arily

thro

ugh

the

inve

stm

ent

secu

ritie

s po

rtfo

lio a

nd o

ther

mar

ket-

base

d in

stru

men

ts.

Stru

ctur

al in

tere

st ra

te r

isk

is s

ubje

ct to

tole

ranc

es

set b

y th

e in

depe

nden

t Str

uctu

ral I

nter

est R

ate

Risk

fu

nctio

n. O

ur re

cent

enh

ance

men

ts to

str

engt

hen

the

func

tion

incl

ude:

gove

rnan

ce m

odel

and

inst

ill th

ough

tful

bes

t pr

actic

es w

ith m

arke

t-ba

sed

disc

iplin

e

polic

y as

a B

oard

-leve

l pol

icy

-ri

ally

enh

ance

the

auto

mat

ion

of in

tere

st ra

te r

isk

mea

sure

men

t, m

odel

dev

elop

men

t, re

port

ing

and

data

inte

grat

ion

Prin

cipa

l ris

k

Prin

cipa

l inv

estm

ents

gen

eral

ly a

re in

tend

ed to

be

held

ove

r ex

tend

ed in

vest

men

t per

iods

, and

, acc

ord-

ingl

y, th

e co

mpa

ny h

as n

o ex

pect

atio

n fo

r sh

ort-

term

gai

n w

ith r

espe

ct to

thes

e in

vest

men

ts. S

uch

inve

stin

g ac

tiviti

es in

clud

e pr

ivat

e eq

uity

inve

stm

ents

, m

ezza

nine

fina

ncin

g an

d ta

x-or

ient

ed in

vest

men

ts.

A nu

mbe

r of

pri

ncip

al in

vest

ing

busi

ness

es a

re b

eing

re

posi

tione

d or

exi

ted,

con

sist

ent w

ith th

e co

mpa

ny’s

st

rate

gic

focu

s an

d bu

sine

ss s

impl

ifica

tion

prog

ram

s,

ongo

ing

capi

tal a

nd b

alan

ce s

heet

liqu

idity

pri

oriti

es,

and

regu

lato

ry d

evel

opm

ents

.

CON

TRO

L FU

NCT

ION

SH

OW

WE

DO

BU

SIN

ESS

— O

UR

CO

NTR

OL

ENV

IRO

NM

ENT

44 Coun

try

risk

Coun

try

risk

is th

e ri

sk th

at a

sov

erei

gn e

vent

or

actio

n al

ters

the

valu

e or

term

s of

con

trac

tual

obl

igat

ions

of

oblig

ors,

cou

nter

part

ies

and

issu

ers

or a

dver

sely

affe

cts

mar

kets

rela

ted

to a

par

ticul

ar c

ount

ry. T

he c

ompa

ny

has

a co

mpr

ehen

sive

cou

ntry

ris

k m

anag

emen

t fr

amew

ork

for

asse

ssin

g co

untr

y ri

sks,

det

erm

inin

g ri

sk

tole

ranc

e, a

nd m

easu

ring

and

mon

itori

ng d

irect

cou

ntry

ex

posu

res

in th

e co

mpa

ny. O

ur re

cent

enh

ance

men

ts to

st

reng

then

the

gove

rnan

ce a

nd m

anag

emen

t of c

ount

ry

risk

incl

ude:

coun

try

a ro

bust

set

of m

arke

t sho

cks

on a

sset

s

capi

tal m

easu

res

Ope

rati

onal

ris

k

Ope

ratio

nal r

isk

is in

here

nt in

eac

h of

the

com

pany

’s lin

es o

f bus

ines

s an

d co

rpor

ate

func

tions

. Ope

ratio

nal

risk

can

man

ifest

itse

lf in

var

ious

way

s, in

clud

ing

erro

rs,

frau

dule

nt a

cts,

bus

ines

s in

terr

uptio

ns, i

napp

ropr

iate

be

havi

or o

f em

ploy

ees,

failu

re to

com

ply

with

app

licab

le

law

s an

d re

gula

tions

or

failu

re o

f ven

dors

to p

erfo

rm

in a

ccor

danc

e w

ith th

eir

arra

ngem

ents

. To

mon

itor

and

cont

rol o

pera

tiona

l ris

k, th

e co

mpa

ny h

as d

evel

oped

an

ope

ratio

nal r

isk

man

agem

ent f

ram

ewor

k (O

RMF)

th

at c

onsi

sts

of fo

ur c

ompo

nent

s: o

vers

ight

and

gov

er-

nanc

e, c

apita

l mea

sure

men

t, ri

sk s

elf-a

sses

smen

t, an

d re

port

ing

and

mon

itori

ng.

Ope

ratio

nal r

isk

gove

rnan

ce d

efine

s an

d m

aint

ains

th

e O

RMF

thro

ugh

the

deve

lopm

ent o

f pol

icie

s an

d st

anda

rds

appl

icab

le to

all

lines

of b

usin

ess

and

corp

orat

e fu

nctio

ns, i

nclu

ding

Ris

k, F

inan

ce,

Com

plia

nce,

Tec

hnol

ogy

and

Hum

an R

esou

rces

. Lin

es

of b

usin

ess

and

corp

orat

e fu

nctio

ns a

re re

spon

sibl

e fo

r ex

ecut

ion

agai

nst t

he O

RMF.

Ope

ratio

nal r

isk

gove

r-na

nce

may

inde

pend

ently

cha

lleng

e th

e ex

ecut

ion

of th

e O

RMF

acro

ss th

e co

mpa

ny. V

ario

us in

itiat

ives

und

erw

ay

to im

prov

e th

e O

RMF

incl

ude:

deci

sion

s, a

s w

ell a

s op

erat

iona

l ris

k ap

petit

e as

sess

men

ts

Fidu

ciar

y ri

sk

Fidu

ciar

y ris

k is

the

risk

of a

failu

re to

exe

rcis

e th

e ap

pli-

cabl

e hi

gh s

tand

ard

of c

are,

to a

ct in

the

best

inte

rest

s of

clie

nts

or to

trea

t clie

nts

fairl

y, a

s re

quire

d un

der

appl

icab

le la

w o

r reg

ulat

ion.

We

have

enh

ance

d se

vera

l as

pect

s of

our

gov

erna

nce

of fi

duci

ary

risk,

incl

udin

g:

outli

nes

role

s an

d re

spon

sibi

litie

s ac

ross

bus

ines

ses

prov

ides

ove

rsig

ht o

f the

inhe

rent

ris

ks in

the

firm

’s fid

ucia

ry a

ctiv

ities

CON

TRO

L FU

NCT

ION

S

HO

W W

E D

O B

USI

NES

S —

OU

R C

ON

TRO

L EN

VIR

ON

MEN

T45

Rep

utat

ion

risk

Mai

ntai

ning

the

com

pany

’s re

puta

tion

is th

e re

spon

si-

bilit

y of

eac

h in

divi

dual

em

ploy

ee o

f the

com

pany

. The

co

mpa

ny’s

Repu

tatio

n Ri

sk p

olic

y ex

plic

itly

vest

s ea

ch

empl

oyee

with

the

resp

onsi

bilit

y to

con

side

r th

e re

puta

-tio

n of

the

com

pany

whe

n en

gagi

ng in

any

act

ivity

. Ove

r th

e pa

st s

ever

al y

ears

, the

com

pany

has

take

n st

eps

to

prom

ote

the

cons

iste

nt m

anag

emen

t of r

eput

atio

n ri

sk

firm

wid

e, in

clud

ing:

grou

p

repu

tatio

n ri

sk g

over

nanc

e fr

amew

ork

agai

nst

benc

hmar

k cr

iteri

a

each

line

of b

usin

ess

has

impl

emen

ted

in g

uide

lines

re

flect

ive

of it

s bu

sine

ss m

odel

Fina

nce

The

Fina

nce

grou

p pl

ays

an e

ssen

tial r

ole

in th

e da

y-to

-day

man

agem

ent o

f the

com

pany

and

is a

cri

tical

co

mpo

nent

of t

he e

nd-t

o-en

d co

ntro

l env

ironm

ent.

Fina

nce

is a

ccou

ntab

le fo

r th

e ac

cura

cy, i

nteg

rity

and

tim

elin

ess

of th

e co

mpa

ny’s

book

s an

d re

cord

s an

d ex

tern

al re

port

s an

d fil

ings

in a

ccor

danc

e w

ith a

ppli-

cabl

e ac

coun

ting

prin

cipl

es a

nd re

gula

tory

requ

ire-

men

ts. T

he F

inan

ce fu

nctio

n ac

ts a

s a

stew

ard

on b

ehal

f of

sha

reho

lder

s th

roug

h th

e pr

omot

ion

of a

ppro

pria

te

acco

untin

g pr

actic

es, f

ortr

ess

bala

nce

shee

t pri

ncip

les

and

capi

tal m

anag

emen

t.

In a

dditi

on, F

inan

ce fa

cilit

ates

the

deve

lopm

ent a

nd

exec

utio

n of

bus

ines

s st

rate

gy th

roug

h bu

sine

ss

man

agem

ent a

nd p

lann

ing

and

anal

ysis

, whi

ch s

uppo

rt

man

agem

ent’s

dec

isio

n-m

akin

g pr

oces

s. T

he c

ompa

ny’s

over

all s

trat

egic

and

fina

ncia

l obj

ectiv

es a

re m

easu

red

thro

ugh

a se

ries

of fi

nanc

ial a

nd re

gula

tory

targ

ets

and

ratio

s, b

oth

at th

e fir

mw

ide

and

line

of b

usin

ess

leve

l.

Org

aniz

atio

n

Ove

rall

resp

onsi

bilit

y fo

r Fi

nanc

e lie

s w

ith th

e co

mpa

ny’s

Chie

f Fin

anci

al O

ffice

r, a

mem

ber

of th

e O

pera

ting

Com

mitt

ee w

ho re

port

s to

the

CEO

of t

he

com

pany

. The

com

pany

’s ne

arly

8,1

00 F

inan

ce p

rofe

s-si

onal

s ar

e or

gani

zed

into

cor

pora

te fu

nctio

ns a

nd li

ne

of b

usin

ess-

alig

ned

func

tions

, with

the

line

of b

usi-

ness

-alig

ned

func

tions

hav

ing

mat

rixe

d re

port

ing

lines

to

the

Chie

f Fin

anci

al O

ffice

r. In

this

way

, eac

h lin

e of

bu

sine

ss is

acc

ount

able

for

man

agin

g its

fina

nce-

rela

ted

activ

ities

, with

ove

rall

resp

onsi

bilit

y fo

r th

e fu

nctio

n in

to

talit

y re

mai

ning

with

the

Chie

f Fin

anci

al O

ffice

r.

Ove

r the

pas

t sev

eral

yea

rs, w

e ha

ve m

ade

nota

ble

chan

ges

with

in th

e Fi

nanc

e or

gani

zatio

n to

bet

ter a

lign

the

func

tion

with

how

we

man

age

our b

usin

ess

and

to

inco

rpor

ate

new

regu

lato

ry re

quire

men

ts. I

mpo

rtan

t ex

ampl

es in

clud

e in

vest

ing

sign

ifica

nt a

dditi

onal

re

sour

ces

in k

ey fi

rmw

ide

cont

rol f

unct

ions

, inc

ludi

ng

CON

TRO

L FU

NCT

ION

SH

OW

WE

DO

BU

SIN

ESS

— O

UR

CO

NTR

OL

ENV

IRO

NM

ENT

46 regu

lato

ry c

apita

l man

agem

ent,

valu

atio

n co

ntro

l, qu

ality

as

sura

nce,

and

ded

icat

ed c

ontr

olle

rshi

p fu

nctio

ns fo

r Ri

sk, T

ax, C

apita

l and

JPM

orga

n Ch

ase

Bank

, N.A

.

As p

art o

f our

goa

l to

impr

ove

cons

iste

ncy

acro

ss th

e co

mpa

ny, w

e al

so e

xpan

ded

the

Valu

atio

n Co

ntro

l gro

up

to b

e a

firm

wid

e fu

nctio

n. T

he V

alua

tion

Cont

rol g

roup

is

acc

ount

able

for

inde

pend

ently

ver

ifyin

g th

e va

luat

ion

of a

sset

s an

d lia

bilit

ies

reco

rded

on

the

com

pany

’s ba

lanc

e sh

eet a

t fai

r va

lue.

As

part

of t

he e

xpan

sion

of

the

grou

p’s

resp

onsi

bilit

ies,

we

also

mad

e si

gnifi

cant

in

vest

men

ts in

infr

astr

uctu

re, i

ncre

ased

ski

ll le

vels

and

th

e nu

mbe

r of

reso

urce

s de

dica

ted

to th

is e

ffort

, and

re

valid

ated

the

grou

p’s

polic

ies

and

proc

edur

es.

Gove

rnan

ce

The

finan

cial

per

form

ance

of t

he c

ompa

ny a

nd k

ey

Fina

nce-

rela

ted

issu

es a

re re

gula

rly

sche

dule

d ag

enda

ite

ms

for

the

Boar

d of

Dire

ctor

s. B

elow

are

sev

eral

im

port

ant e

xam

ples

of t

he B

oard

of D

irect

ors’

ove

rsig

ht:

annu

ally

by

the

Audi

t Com

mitt

ee o

f the

Boa

rd o

f Di

rect

ors

Anal

ysis

and

Rev

iew

, and

the

Base

l cap

ital p

rogr

am

are

peri

odic

ally

revi

ewed

with

the

Boar

d of

Dire

ctor

s’

Risk

Pol

icy

Com

mitt

ee a

nd A

udit

Com

mitt

ee a

nd th

e fu

ll Bo

ard

of D

irect

ors

Ove

r th

e pa

st s

ever

al y

ears

, we

also

revi

ewed

and

st

reng

then

ed o

ur g

over

nanc

e pr

actic

es to

ens

ure

we

have

the

appr

opri

ate

seni

or m

anag

emen

t ove

rsig

ht

of c

ritic

al p

roce

sses

and

sus

tain

able

rem

edia

tion

of

issu

es th

at a

rise

. We

crea

ted

and

enha

nced

a n

umbe

r of

Fi

nanc

e go

vern

ance

foru

ms,

incl

udin

g:

-lis

hed

in M

arch

201

3, w

hich

rev

iew

s, a

sses

ses

and

prov

ides

ove

rsig

ht o

f ris

k an

d co

ntro

l iss

ues

acro

ss

glob

al F

inan

ce

also

est

ablis

hed

in M

arch

201

3, w

hich

ove

rsee

s th

e ca

pita

l ade

quac

y as

sess

men

t pro

cess

and

is

resp

onsi

ble

for

revi

ewin

g th

e co

mpa

ny’s

Capi

tal

Man

agem

ent p

olic

y an

d th

e pr

inci

ples

und

erly

ing

issu

ance

and

dis

trib

utio

n al

tern

ativ

es a

nd d

ecis

ions -

lishe

d in

the

four

th q

uart

er o

f 201

2, w

hich

ove

rsee

s th

e m

anag

emen

t of a

ll ri

sks

aris

ing

from

the

com

pany

’s ba

lanc

e sh

eet v

alua

tion

activ

ities

Com

mitt

ee, c

reat

ed in

Janu

ary

2014

, whi

ch

gove

rns

the

lead

ban

k’s

activ

ities

in c

ompl

ianc

e

with

regu

lato

ry H

eigh

tene

d St

anda

rds

The

Fina

nce

& R

isk

Road

Map

The

com

pany

’s CF

O a

nd th

e Fi

nanc

e m

anag

emen

t te

am a

naly

zed

the

stab

ility

of t

he e

nd-t

o-en

d Fi

nanc

e pr

oces

ses

and

laun

ched

a m

ulti-

year

impr

ovem

ent

prog

ram

, cal

led

the

Fina

nce

& Ri

sk R

oad

Map

. Thi

s pr

ogra

m is

des

igne

d to

enh

ance

dat

a qu

ality

, man

age-

men

t and

con

trol

at t

he p

oint

of t

rans

actio

n or

igin

atio

n to

sim

plify

and

inte

grat

e th

e te

chno

logy

infr

astr

uc-

ture

acr

oss

Risk

, Fin

ance

and

Tre

asur

y, a

s w

ell a

s to

impl

emen

t a ro

bust

ope

ratin

g m

odel

des

igne

d to

en

sure

a m

ore

effici

ent a

nd e

ffect

ive

orga

niza

tion

with

si

gnifi

cant

ly lo

wer

def

ect r

ates

. In

orde

r to

faci

litat

e th

e su

cces

s of

this

pro

gram

, key

sen

ior-

leve

l hire

s ha

ve

been

mad

e, in

clud

ing

a Ch

ief F

inan

cial

Offi

cer

who

w

orks

for

both

Ris

k an

d Fi

nanc

e an

d w

ho a

lso

serv

es

as th

e pr

ogra

m’s

seni

or s

pons

or; a

Chi

ef In

form

atio

n O

ffice

r ac

ross

Ris

k an

d Fi

nanc

e; a

Chi

ef D

ata

Offi

cer

for

the

com

pany

; and

Chi

ef D

ata

Offi

cers

for

each

of

our

busi

ness

es a

nd fu

nctio

ns. T

his

effor

t is

reco

gniz

ed

and

supp

orte

d by

the

Ope

ratin

g Co

mm

ittee

as

a ke

y st

rate

gic

initi

ativ

e fo

r th

e co

mpa

ny.

CON

TRO

L FU

NCT

ION

S

HO

W W

E D

O B

USI

NES

S —

OU

R C

ON

TRO

L EN

VIR

ON

MEN

T47

Regu

lato

ry in

itia

tive

s

Firm

wid

e pr

ogra

ms

also

wer

e la

unch

ed to

add

ress

ke

y re

gula

tory

initi

ativ

es, m

ost n

otab

ly R

ecov

ery

and

Reso

lutio

n an

d Co

mpr

ehen

sive

Cap

ital A

naly

sis

and

Revi

ew. T

hrou

gh th

ese

prog

ram

s, w

e ha

ve m

ade

fund

a-m

enta

l enh

ance

men

ts to

our

cap

ital p

lann

ing

and

stre

ss

test

ing

fram

ewor

ks, a

s w

ell a

s le

gal e

ntity

and

cri

tical

op

erat

ions

repo

rtin

g. T

hese

impr

ovem

ents

incl

ude

adop

ting

prod

uct-

cent

ric

fore

cast

ing

met

hodo

logi

es,

build

ing

new

or

enha

nced

sta

tistic

al m

odel

s to

faci

litat

e m

ore

gran

ular

fore

cast

ing,

cen

tral

izin

g go

vern

ance

of

mac

roec

onom

ic v

aria

bles

, aut

omat

ing

and

prod

ucin

g tim

ely

lega

l ent

ity-r

elat

ed in

form

atio

n, a

nd a

chie

ving

re

solu

tion

and

reco

very

cap

abili

ties.

The

se p

rogr

ams

invo

lve

hund

reds

of r

esou

rces

and

spa

n th

e or

gani

zatio

n ac

ross

bus

ines

ses,

geo

grap

hies

and

lega

l ent

ities

. The

y in

volv

e po

licy

sett

ing;

gov

erna

nce;

ope

ratin

g m

odel

; and

en

d-to

-end

con

trol

des

ign

and

deve

lopm

ent,

mod

el a

nd

tech

nolo

gy d

evel

opm

ent,

and

docu

men

ted

proc

edur

es.

Impr

oved

con

trol

s

In a

dditi

on to

the

orga

niza

tiona

l cha

nges

, gov

erna

nce

com

mitt

ees

and

regu

lato

ry in

itiat

ives

des

crib

ed a

bove

, w

e ha

ve m

ade

a nu

mbe

r of

enh

ance

men

ts to

our

cor

e Fi

nanc

e co

ntro

l pro

gram

s in

rece

nt y

ears

. Am

ong

them

:

Oxle

y Co

mpl

ianc

e pr

ogra

m a

nd G

ener

al L

edge

r Re

conc

iliat

ion

and

Subs

tant

iatio

n pr

ogra

m. B

oth

are

corn

erst

ones

to e

nsur

ing

the

inte

grity

of o

ur

book

s an

d re

cord

s. F

or th

ese

prog

ram

s, s

copi

ng w

as

revi

ewed

, rev

ised

and

acc

eler

ated

; tes

ting

has

been

en

hanc

ed w

ith m

ore

gran

ular

mile

ston

es; t

rain

ing

has

been

upd

ated

; and

repo

rtin

g ha

s be

en e

nhan

ced

Man

agem

ent p

olic

y, F

inan

ce re

view

ed a

nd e

nhan

ced

its r

isk

and

cont

rol s

elf-a

sses

smen

ts, r

eval

idat

ing

the

func

tion’

s in

here

nt r

isks

, und

erta

king

det

aile

d pr

oces

s m

appi

ng, i

dent

ifyin

g an

d re

view

ing

the

desi

gn o

f key

fina

ncia

l con

trol

s, a

nd, u

ltim

atel

y,

test

ing

the

effec

tiven

ess

of th

ese

cont

rols

. Thi

s is

a

criti

cal o

ngoi

ng s

trat

egic

initi

ativ

e in

volv

ing

cont

in-

uous

effo

rts

to im

prov

e

Qua

lity

Assu

ranc

e pr

ogra

m, w

hich

initi

ally

focu

sed

on th

e ac

cura

cy o

f reg

ulat

ory

filin

gs, t

hen

broa

dene

d in

ord

er to

val

idat

e da

ta in

tegr

ity a

cros

s th

e fir

m a

nd

prov

ide

resu

lts to

the

func

tion’

s Ch

ief D

ata

Offi

cer

Repo

rtin

g tr

ansp

aren

cy

We

are

com

mitt

ed to

tim

ely,

tran

spar

ent a

nd a

ppro

-pr

iate

repo

rtin

g an

d di

sclo

sure

s in

ord

er to

furn

ish

exte

rnal

con

stitu

ents

with

app

ropr

iate

and

suffi

cien

t in

form

atio

n to

ass

ess

the

risk

s an

d pe

rfor

man

ce o

f th

e co

mpa

ny, a

s w

ell a

s to

com

ply

with

acc

ount

ing

and

regu

lato

ry re

quire

men

ts. T

he c

ompa

ny’s

CFO

an

d Fi

nanc

e m

anag

emen

t tea

m re

gula

rly

revi

ew a

nd

enha

nce

the

qual

ity o

f our

ext

erna

l dis

clos

ures

, par

tic-

ular

ly th

ose

in th

e qu

arte

rly

earn

ings

pre

sent

atio

n an

d th

e 10

-K a

nd 1

0-Q

repo

rts.

CON

TRO

L FU

NCT

ION

SH

OW

WE

DO

BU

SIN

ESS

— O

UR

CO

NTR

OL

ENV

IRO

NM

ENT

48 Com

plia

nce

The

com

pany

’s gl

obal

Com

plia

nce

depa

rtm

ent i

s a

core

co

mpo

nent

of t

he c

ompa

ny’s

cont

rol e

ffort

s.

Whi

le e

ach

line

of b

usin

ess

is a

ccou

ntab

le fo

r m

anag

ing

its c

ompl

ianc

e ri

sk, o

ur C

ompl

ianc

e te

ams

wor

k cl

osel

y w

ith th

e O

pera

ting

Com

mitt

ee a

nd s

enio

r m

anag

emen

t to

prov

ide

inde

pend

ent r

evie

w a

nd

over

sigh

t of o

ur li

nes

of b

usin

ess

oper

atio

ns, w

ith a

fo

cus

on c

ompl

ianc

e w

ith a

pplic

able

glo

bal,

regi

onal

an

d lo

cal l

aws

and

regu

latio

ns.

In p

artic

ular

, the

role

of C

ompl

ianc

e is

to id

entif

y,

mea

sure

, mon

itor,

repo

rt o

n an

d pr

ovid

e ov

ersi

ght

rega

rdin

g co

mpl

ianc

e ri

sks

aris

ing

from

bus

ines

s

oper

atio

ns a

nd p

rovi

de g

uida

nce

on h

ow th

e co

mpa

ny

can

miti

gate

thes

e ri

sks.

Org

aniz

atio

n an

d go

vern

ance

To m

eet i

ts re

spon

sibi

litie

s, C

ompl

ianc

e op

erat

es

inde

pend

ently

from

the

lines

of b

usin

ess.

The

firm

wid

e Ch

ief C

ompl

ianc

e O

ffice

r (C

CO) r

epor

ts to

the

com

pany

’s Ch

ief O

pera

ting

Offi

cer

and

lead

s th

e m

ore

than

3,0

00-

pers

on C

ompl

ianc

e de

part

men

t (ex

clud

ing

Tech

nolo

gy

and

Ope

ratio

ns e

mpl

oyee

s w

ho s

uppo

rt C

ompl

ianc

e).

The

firm

wid

e CC

O is

sup

port

ed b

y a

CCO

for

each

bu

sine

ss, a

s w

ell a

s re

gion

al C

COs

in th

e Eu

rope

, Mid

dle

East

and

Afr

ica,

Asi

a Pa

cific

and

Lat

in A

mer

ica

regi

ons.

Re

gion

al C

COs

have

aut

hori

ty a

cros

s lin

es o

f bus

ines

s in

th

eir

resp

ectiv

e re

gion

s ex

cept

in s

ituat

ions

whe

re th

is

stru

ctur

e co

nflic

ts w

ith lo

cal r

egul

ator

y ob

ligat

ions

.

Until

ear

ly 2

013,

Com

plia

nce

was

par

t of a

join

t Leg

al

& C

ompl

ianc

e gr

oup.

The

com

pany

sep

arat

ed th

e fu

nctio

ns to

pro

vide

eac

h gr

oup

with

ded

icat

ed le

ad-

ersh

ip, r

esou

rces

and

sup

port

. Thi

s m

ove

emph

asiz

ed

the

impo

rtan

ce a

nd s

tatu

re o

f Com

plia

nce,

as

wel

l as

the

com

pany

’s c

omm

itmen

t to

mai

ntai

ning

a c

ultu

re o

f co

mpl

ianc

e an

d co

ntro

l.

To e

xecu

te o

ur C

ompl

ianc

e pr

ogra

m, w

e m

ust h

ave

empl

oyee

s w

ith r

elev

ant f

unct

iona

l, bu

sine

ss a

nd

regu

lato

ry e

xper

tise.

We

have

take

n se

vera

l ste

ps to

ac

com

plis

h th

is, i

nclu

ding

add

ing

mor

e th

an 1

,200

Co

mpl

ianc

e pr

ofes

sion

als

duri

ng 2

012

and

2013

. We

expe

ct to

bri

ng o

n ab

out 4

70 a

dditi

onal

peo

ple

by th

e en

d of

201

4, a

t whi

ch ti

me

our

Com

plia

nce

head

coun

t w

ill b

e ap

prox

imat

ely

3,15

0, a

n in

crea

se o

f 117

% s

ince

th

e be

ginn

ing

of 2

012.

The

follo

win

g pa

ges

sum

mar

ize

key

actio

ns w

e ha

ve

take

n to

enh

ance

Com

plia

nce.

Glob

al C

ompl

ianc

e pr

ogra

m

In 2

012,

the

com

pany

est

ablis

hed

an e

nhan

ced

and

mor

e ce

ntra

lized

glo

bal C

ompl

ianc

e pr

ogra

m to

pro

vide

:

acro

ss b

usin

esse

s an

d re

gion

s

prot

ocol

s to

add

ress

regu

lato

ry g

uida

nce

acro

ss th

e co

re p

ract

ices

The

prog

ram

is d

esig

ned

arou

nd s

even

cor

e pr

actic

es

that

func

tion

toge

ther

as

an in

tegr

ated

ris

k m

anag

e-m

ent f

ram

ewor

k (e

.g.,

risk

ass

essm

ents

info

rm te

stin

g an

d tr

aini

ng p

lans

, and

regu

lato

ry m

anag

emen

t affe

cts

polic

ies

and

proc

edur

es).

This

fram

ewor

k al

low

s fo

r co

ntin

uous

enh

ance

men

ts in

eac

h cy

cle

of th

e pr

ogra

m

to a

ccom

mod

ate

busi

ness

and

regu

lato

ry c

hang

es. T

he

core

pra

ctic

es a

re:

CON

TRO

L FU

NCT

ION

S

HO

W W

E D

O B

USI

NES

S —

OU

R C

ON

TRO

L EN

VIR

ON

MEN

T49

1. G

over

nanc

e an

d ov

ersi

ght

Prov

idin

g in

depe

nden

t gov

erna

nce

and

over

sigh

t of

busi

ness

act

iviti

es is

one

of C

ompl

ianc

e’s

prim

ary

resp

on-

sibi

litie

s. A

s su

ch, w

e ha

ve e

nhan

ced

Com

plia

nce’

s in

de-

pend

ent o

vers

ight

in s

ever

al re

spec

ts, i

nclu

ding

thro

ugh:

busi

ness

and

regi

on u

sing

bus

ines

s ac

tiviti

es, r

isk

asse

ssm

ent r

esul

ts a

nd o

ther

dat

a to

hel

p pr

iori

tize

Com

plia

nce

activ

ities

and

to d

eplo

y re

sour

ces

whe

ther

the

lines

of b

usin

ess

and

regi

ons

have

effe

c-tiv

ely

impl

emen

ted

the

stan

dard

s an

d pr

otoc

ols

for

the

Com

plia

nce

prog

ram

of

Dire

ctor

s’ A

udit

Com

mitt

ee o

n Co

mpl

ianc

e pr

ogra

m d

evel

opm

ents

and

sig

nific

ant o

r em

ergi

ng

com

plia

nce

risk

s

cons

ider

atio

ns in

line

of b

usin

ess

and

regi

onal

N

ew B

usin

ess

Initi

ativ

e Ap

prov

al p

roce

ss a

nd p

ost-

impl

emen

tatio

n re

view

s

2. R

egul

ator

y m

anag

emen

t

The

com

pany

impl

emen

ts c

ontr

ols

to m

anag

e co

mpl

i-an

ce r

isks

bas

ed o

n re

leva

nt re

gula

tory

obl

igat

ions

. W

e co

ntin

ue to

mak

e im

prov

emen

ts in

our

abi

lity

to

eval

uate

dev

elop

men

ts re

gard

ing

thes

e ob

ligat

ions

and

ad

just

con

trol

s as

nec

essa

ry. W

e al

so h

ave

enha

nced

our

ap

proa

ch to

regu

lato

ry in

tera

ctio

ns, i

nclu

ding

exa

m-

inat

ions

, to

achi

eve

bett

er c

onsi

sten

cy in

thes

e in

tera

c-tio

ns. E

nhan

cem

ents

incl

ude:

busi

ness

es a

nd fu

nctio

ns

man

agem

ent t

hrou

gh th

e cr

eatio

n of

firm

wid

e pr

otoc

ols

inte

nded

to in

crea

se th

e co

nsis

tenc

y of

pr

epar

atio

n, c

oord

inat

ion

and

exec

utio

n of

com

pli-

ance

-foc

used

regu

lato

ry e

xam

s

3. P

olic

ies

and

proc

edur

es

The

polic

y m

anag

emen

t fra

mew

ork

is u

sed

by

Com

plia

nce

to d

esig

n, im

plem

ent a

nd m

aint

ain

polic

ies

and

proc

edur

es th

at s

uppo

rt c

ompl

ianc

e w

ith re

gula

-to

ry o

blig

atio

ns. T

he fr

amew

ork

has

been

enh

ance

d ov

er ti

me

and

used

to b

road

en th

e co

mpa

ny’s

polic

ies

and

proc

edur

es. F

or e

xam

ple,

the

mod

el n

ow in

clud

es

spec

ific

requ

irem

ents

for

gove

rnan

ce, f

orm

at a

nd te

ch-

nolo

gy, w

hich

dri

ve c

onsi

sten

cy a

nd in

crea

se c

ontr

ol

and

usab

ility

.

4. T

rain

ing

and

awar

enes

s

Trai

ning

on

and

awar

enes

s of

Com

plia

nce-

rela

ted

polic

ies

and

proc

edur

es re

info

rce

our

cultu

re o

f com

pli-

ance

and

hel

p im

plem

ent r

equi

red

cont

rols

. To

that

end

, w

e ha

ve:

incl

udin

g th

e de

velo

pmen

t of a

line

of b

usin

ess

Com

plia

nce

trai

ning

-nee

ds a

naly

sis

the

line

of b

usin

ess

and

regi

onal

Com

plia

nce

plan

s

stud

y tr

aini

ng fo

r Co

mpl

ianc

e pr

ofes

sion

als

incl

udin

g a

spea

ker

seri

es fo

cuse

d on

del

iver

ing

rele

vant

trai

ning

to e

mpl

oyee

s in

Ove

rsig

ht &

Co

ntro

l, Ri

sk, C

ompl

ianc

e an

d Le

gal

5. M

onit

orin

g an

d te

stin

g

Com

plia

nce

inde

pend

ently

mon

itors

and

test

s bu

sine

ss a

ctiv

ities

usi

ng a

ris

k-ba

sed

appr

oach

to

eval

uate

the

adeq

uacy

and

effe

ctiv

enes

s of

cri

tical

co

ntro

l pro

cess

es. T

he c

ompa

ny h

as s

tren

gthe

ned

this

ov

ersi

ght i

n se

vera

l way

s:

proc

edur

es a

nd in

augu

ral g

loba

l Com

plia

nce

mon

i-to

ring

pro

cedu

res

CON

TRO

L FU

NCT

ION

SH

OW

WE

DO

BU

SIN

ESS

— O

UR

CO

NTR

OL

ENV

IRO

NM

ENT

50

crite

ria

for

key

risk

s

-po

rate

root

cau

ses

of is

sues

and

laun

ched

glo

bal

Com

plia

nce

Test

ing

Fund

amen

tals

Wor

ksho

ps. T

he

wor

ksho

ps in

clud

e de

ep-d

ive

test

ing,

trai

ning

and

pr

actic

al a

pplic

atio

ns o

f the

cur

rent

mon

itori

ng a

nd

test

ing

stan

dard

s

6. Is

sue

man

agem

ent

Issu

e m

anag

emen

t is

a m

ulti-

step

pro

cess

that

incl

udes

id

entif

ying

issu

es, fi

ndin

g th

eir

sour

ce a

nd im

ple-

men

ting

solu

tions

to re

solv

e th

e is

sues

. Com

plia

nce

has

enha

nced

its

issu

e m

anag

emen

t pra

ctic

es in

sev

eral

re

spec

ts:

prov

ide

over

sigh

t of o

pera

tiona

l ris

ks a

nd th

e co

ntro

l en

viro

nmen

t for

the

Com

plia

nce

depa

rtm

ent.

This

co

mm

ittee

repo

rts

and

esca

late

s is

sues

to th

e Fi

rmw

ide

Cont

rol C

omm

ittee

issu

es

com

pens

atin

g co

ntro

ls o

f new

ly id

entifi

ed r

isk

issu

es

until

long

er-t

erm

act

ion

plan

s ar

e co

mpl

eted

7. C

ompl

ianc

e ri

sk a

sses

smen

t and

rep

orti

ng

Com

plia

nce

risk

ass

essm

ents

iden

tify,

mea

sure

, as

sess

and

rep

ort c

ompl

ianc

e ri

sks

usin

g a

cons

iste

nt

appr

oach

and

met

hodo

logy

to e

nabl

e fir

mw

ide

aggr

e-ga

tion

of c

ompl

ianc

e ri

sks.

We

anal

yze

com

plia

nce

risk

bas

ed u

pon

cate

gory

and

then

use

the

asse

ssm

ent

resu

lts to

pri

oriti

ze C

ompl

ianc

e ac

tiviti

es, i

nclu

ding

ri

sk-b

ased

mon

itori

ng a

nd te

stin

g, a

s w

ell a

s tr

aini

ng

plan

s. T

he fo

llow

ing

impr

ovem

ents

hav

e he

lped

st

reng

then

thes

e pr

actic

es:

prog

ram

that

incl

udes

a s

urve

y to

ol th

at a

sses

ses

com

plia

nce

risk

to e

nhan

ce c

onsi

sten

cy, d

ocum

enta

-tio

n an

d co

mpr

ehen

sive

ness

refle

ct (i

n re

sidu

al r

isk

ratin

gs) t

he im

pact

of i

neffe

c-tiv

e co

ntro

ls, r

egar

dles

s of

the

ratin

g of

the

inhe

rent

ri

sk a

t iss

ue

laun

deri

ng r

isk

asse

ssm

ent t

o in

clud

e m

ore

robu

st

met

hodo

logi

es to

qua

ntify

ris

k ex

posu

re a

t var

ious

le

vels

of t

he c

ompa

ny

Tech

nolo

gy

Effec

tive

use

of te

chno

logy

is e

ssen

tial t

o ev

ery

com

pone

nt o

f the

Com

plia

nce

prog

ram

. We

have

bo

lste

red

our

Com

plia

nce

tech

nolo

gy a

nd m

anag

emen

t re

port

ing

thro

ugh

cont

inue

d in

vest

men

ts in

sys

tem

s,

oper

atin

g pl

atfo

rms

and

peop

le, i

nclu

ding

by:

Com

plia

nce

tech

nolo

gy a

nd o

pera

tions

pla

tform

s an

d pe

rson

nel.

In 2

014,

we

will

spe

nd o

ver

$450

m

illio

n in

thes

e ar

eas

-tio

ns e

mpl

oyee

s su

ppor

ting

Com

plia

nce

duri

ng 2

012

and

2013

. In

2014

, we

plan

on

addi

ng a

n ad

ditio

nal

720

empl

oyee

s in

thes

e ar

eas

CON

TRO

L FU

NCT

ION

S

HO

W W

E D

O B

USI

NES

S —

OU

R C

ON

TRO

L EN

VIR

ON

MEN

T51

Glob

al F

inan

cial

Cri

mes

Com

plia

nce

prog

ram

The

Glob

al F

inan

cial

Cri

mes

Com

plia

nce

(GFC

C) g

roup

, cr

eate

d in

201

2, is

a s

ub-f

unct

ion

of C

ompl

ianc

e fo

cuse

d on

com

plia

nce

with

the

law

s an

d re

gula

tions

gov

erni

ng

the

Bank

Sec

recy

Act

(BSA

) and

ant

i-mon

ey la

unde

ring

la

ws

(AM

L, a

nd, c

olle

ctiv

ely

with

BSA

, BSA

/AM

L),

terr

oris

t fina

ncin

g, e

cono

mic

san

ctio

ns a

nd a

nti-c

orru

p-tio

n. T

he g

roup

impl

emen

ts a

nd p

rovi

des

over

sigh

t of a

ll as

pect

s of

the

com

pany

’s GF

CC p

rogr

am, i

nclu

ding

the

BSA/

AML

and

Know

You

r Cu

stom

er p

rogr

ams.

We

cont

inue

to in

vest

in h

irin

g th

e ri

ght p

eopl

e,

impr

ovin

g ou

r te

chno

logy

cap

abili

ties

and

enha

ncin

g GF

CC p

rogr

ams

glob

ally

. The

pag

es th

at fo

llow

des

crib

e ho

w s

ome

of th

ese

reso

urce

s ha

ve b

een

allo

cate

d.

Boa

rd a

ctio

ns

His

tori

cally

, the

Aud

it Co

mm

ittee

has

revi

ewed

com

pli-

ance

and

regu

lato

ry m

atte

rs a

ffect

ing

the

com

pany

and

GF

CC, i

nclu

ding

the

BSA/

AML

prog

ram

and

AM

L po

licy.

In

ear

ly 2

012,

the

com

pany

est

ablis

hed

a Bo

ard-

leve

l AM

L En

hanc

emen

t Com

mitt

ee to

ove

rsee

the

com

pany

’s eff

orts

to im

prov

e its

BSA

/AM

L pr

ogra

m.

Follo

win

g th

e en

try

into

regu

lato

ry o

rder

s re

gard

ing

BSA/

AML

in 2

013,

the

Boar

d es

tabl

ishe

d a

BSA/

AML

Com

plia

nce

Com

mitt

ee c

onsi

stin

g of

thre

e in

depe

nden

t di

rect

ors.

Thi

s ne

w c

omm

ittee

ove

rsee

s fir

mw

ide

GFCC

m

atte

rs a

nd re

late

d re

spon

sibi

litie

s, a

s w

ell a

s th

e fo

llow

ing

addi

tiona

l res

pons

ibili

ties:

man

agem

ent a

nd m

itiga

tion

of id

entifi

ed B

SA/A

ML

com

plia

nce

risk

s

eff

ectiv

enes

s

with

, the

regu

lato

ry o

rder

s of

the

Fede

ral R

eser

ve

and

the

Offi

ce o

f the

Com

ptro

ller

of th

e Cu

rren

cy

rega

rdin

g BS

A/AM

L

Man

agem

ent a

ctio

ns

Man

agem

ent a

nd th

e GF

CC g

roup

are

wor

king

to

enha

nce

our

BSA/

AML

prog

ram

by

incr

easi

ng o

ur a

bilit

y to

man

age

rela

ted

risk

, im

prov

ing

cust

omer

onb

oard

ing

and

due

dilig

ence

, and

hei

ghte

ning

our

sus

pici

ous

tran

s-ac

tion

mon

itori

ng. A

key

par

t of t

hese

effo

rts

has

been

th

e hi

ring

and

trai

ning

of t

alen

t. By

the

end

of 2

014,

w

e w

ill h

ave

hire

d m

ore

than

9,5

00 fu

ll-tim

e eq

uiva

-le

nt e

mpl

oyee

s ac

ross

mul

tiple

dis

cipl

ines

focu

sed

on

finan

cial

cri

me-

rela

ted

mat

ters

— m

ore

than

a 3

00%

in

crea

se s

ince

201

2. O

ur le

ader

ship

team

in th

is a

rea

repr

esen

ts a

wid

e ra

nge

of v

arie

d pr

ofes

sion

al b

ack-

grou

nds

from

the

publ

ic a

nd p

riva

te s

ecto

rs, i

nclu

ding

fe

dera

l law

enf

orce

men

t offi

cial

s, fe

dera

l reg

ulat

ors,

at

torn

eys

and

finan

cial

ser

vice

s-re

late

d pr

ofes

sion

als.

AM

L, s

anct

ions

and

ant

i-co

rrup

tion

ris

k as

sess

men

t

We

cond

uct A

ML,

san

ctio

ns a

nd a

nti-c

orru

ptio

n ri

sk

asse

ssm

ents

. The

201

3 as

sess

men

ts u

sed

an e

nhan

ced

met

hodo

logy

to q

uant

ify e

ach

busi

ness

’ pot

entia

l ex

posu

re to

mon

ey la

unde

ring

, ter

rori

st fi

nanc

ing,

sa

nctio

ns a

nd a

nti-c

orru

ptio

n ri

sk a

nd to

eva

luat

e th

e qu

ality

of t

he c

urre

nt c

ontr

ols

in p

lace

to m

itiga

te

thos

e ri

sks.

Thi

s an

alys

is u

tiliz

ed c

ount

ry-le

vel d

ata

and

risk

ass

essm

ent r

epor

ts fo

r th

e lin

es o

f bus

ines

s an

d su

b-lin

es o

f bus

ines

s.

Ant

i-co

rrup

tion

JPM

orga

n Ch

ase

is s

ubje

ct to

ant

i-cor

rupt

ion

law

s (e

.g.,

the

Fore

ign

Corr

upt P

ract

ices

Act

) tha

t mak

e it

illeg

al fo

r us

to b

ribe

fore

ign

offici

als

to o

btai

n or

reta

in b

usin

ess.

O

ver

the

last

sev

eral

yea

rs, w

e ha

ve u

nder

take

n eff

orts

to

str

engt

hen

our

effor

ts to

iden

tify

and

miti

gate

co

rrup

tion

risk

s, in

clud

ing:

of b

usin

ess,

incl

udin

g en

hanc

ing

over

sigh

t ove

r gi

fts

and

ente

rtai

nmen

t and

thir

d-pa

rty

vend

ors

spor

ts a

nd e

nter

tain

men

t

CON

TRO

L FU

NCT

ION

SH

OW

WE

DO

BU

SIN

ESS

— O

UR

CO

NTR

OL

ENV

IRO

NM

ENT

52

dilig

ence

on

thir

d-pa

rty

vend

ors

in tr

ansa

ctio

ns

Cust

omer

due

dili

genc

e an

d cl

ient

ris

k sc

orin

g

We

have

impl

emen

ted

a ri

sk-b

ased

app

roac

h to

co

llect

ing,

doc

umen

ting

and

mai

ntai

ning

cus

tom

er,

prod

uct a

nd/o

r tr

ansa

ctio

nal d

ue d

ilige

nce

info

rmat

ion.

Th

e co

mpa

ny m

aint

ains

its

due

dilig

ence

info

rmat

ion

thro

ugh

ongo

ing

cont

act w

ith c

lient

s an

d pe

riod

ic

revi

ews

of c

lient

s an

d ac

coun

ts. S

ome

of o

ur im

prov

e-m

ents

incl

ude:

docu

men

ts, i

nclu

ding

ris

k to

lera

nce

guid

elin

es,

com

plia

nce

revi

ew g

uide

lines

, per

iodi

c re

view

and

ac

coun

t act

ivity

revi

ew m

etho

dolo

gy, h

olis

tic v

iew

/ex

tend

ed re

latio

nshi

p re

quire

men

ts c

rite

ria,

Kno

w

Your

Cus

tom

er a

ppro

val g

uide

lines

and

hig

h-ri

sk

trig

ger

rule

s by

cus

tom

er ty

pe

crite

ria

that

incl

ude,

as

appl

icab

le, a

cus

tom

er’s

owne

rs, p

rinc

ipal

s, s

igne

rs, s

ubsi

diar

ies,

affi

liate

s,

and

part

ies

that

man

age

and/

or c

ontr

ol th

e ac

coun

t or

clie

nt

and

proc

edur

es b

y cu

stom

er ty

pe to

dri

ve fi

rmw

ide

cons

iste

ncy

will

dri

ve th

e ne

ed fo

r en

hanc

ed d

ue d

ilige

nce,

mor

e fr

eque

nt p

erio

dic

revi

ews,

gre

ater

num

ber

of s

enio

r ap

prov

als

and

in-d

epth

tran

sact

ion

mon

itori

ng

Tran

sact

ion

mon

itor

ing

As p

art o

f our

com

plia

nce

effor

ts, w

e re

view

tran

sac-

tions

for

pote

ntia

l sus

pici

ous

activ

ity a

nd re

port

thes

e ac

tiviti

es to

the

gove

rnm

ent.

We

have

und

erta

ken

sign

if-ic

ant e

ffort

s to

enh

ance

our

abi

lity

to m

onito

r tr

ansa

c-tio

ns fo

r po

tent

ial s

uspi

ciou

s ac

tivity

, inc

ludi

ng:

desi

gned

to e

nsur

e tim

ely

and

appr

opri

ate

revi

ew

and

disp

ositi

on o

f ale

rts

requ

irem

ents

for A

ML

inve

stig

atio

ns in

the

Euro

pe,

Mid

dle

East

and

Afr

ica

and

Asia

Pac

ific

regi

ons

to

stan

dard

ize

and

auto

mat

e th

e pr

oces

s w

orld

wid

e an

d pr

ovid

e a

glob

al fe

edba

ck lo

op in

to in

vest

igat

ions

to m

aint

ain

data

inte

grity

, glo

bally

con

sist

ent

plat

form

s, c

usto

mer

sur

veill

ance

sce

nari

os a

nd a

co

ntin

uous

impr

ovem

ent p

roce

ss

qual

ity c

ontr

ol p

roce

sses

to re

view

and

inve

stig

ate

susp

icio

us a

ctiv

ity

Our

tran

sact

ion

mon

itori

ng e

nhan

cem

ents

cov

er b

oth

dom

estic

and

cro

ss-b

orde

r tr

ansa

ctio

ns. W

e ha

ve

depl

oyed

team

s to

focu

s on

num

erou

s ty

pes

of a

ctiv

i-tie

s, in

clud

ing

corr

espo

nden

t ban

king

, hum

an tr

affick

ing

and

terr

oris

t fina

ncin

g.

CON

TRO

L FU

NCT

ION

S

HO

W W

E D

O B

USI

NES

S —

OU

R C

ON

TRO

L EN

VIR

ON

MEN

T53

Sanc

tion

s an

d cl

ient

scr

eeni

ng p

rogr

ams

We

also

scr

een

cust

omer

s an

d tr

ansa

ctio

ns (i

nvol

ving

in

divi

dual

s an

d en

titie

s th

at a

re s

ubje

ct to

san

ctio

ns a

nd

emba

rgoe

s) in

volv

ed in

neg

ativ

e m

edia

refe

renc

es o

r who

ar

e po

litic

ally

exp

osed

per

sons

. We

have

take

n se

vera

l ac

tions

to e

nhan

ce o

ur s

cree

ning

cap

abili

ties,

incl

udin

g:

scre

enin

g

to a

new

cen

tral

scr

eeni

ng u

tility

by in

crea

sing

sta

ff w

ithin

our

cen

tral

scr

eeni

ng u

tility

an

d fo

r in

tern

atio

nal s

anct

ions

com

plia

nce

Offi

ce o

f For

eign

Ass

ets

Cont

rol a

nd s

anct

ions

co

mpl

ianc

e

scre

enin

g pl

atfo

rms

to a

new

scr

eeni

ng p

latfo

rm th

at

will

be

part

of a

cen

tral

ized

list

repo

sito

ry

Susp

icio

us A

ctiv

ity

Rep

orts

A Su

spic

ious

Act

ivity

Rep

ort (

SAR)

gen

eral

ly is

a r

epor

t th

at a

fina

ncia

l ins

titut

ion

send

s to

a r

egul

ator

(e.g

., in

th

e U

nite

d St

ates

, the

Fin

anci

al C

rim

es E

nfor

cem

ent

Net

wor

k) r

egar

ding

act

iviti

es o

r tr

ansa

ctio

ns th

at a

re

susp

icio

us. T

his

help

s go

vern

men

t age

ncie

s id

entif

y in

divi

dual

s or

org

aniz

atio

ns th

at a

re in

volv

ed in

cr

imin

al a

ctiv

ity, i

nclu

ding

frau

d, te

rror

ist fi

nanc

ing

and

mon

ey la

unde

ring

.

We

cont

inue

to re

view

our

SAR

pra

ctic

es, b

oth

in th

e Un

ited

Stat

es a

nd g

loba

lly, t

o id

entif

y ar

eas

of im

prov

e-m

ent a

nd to

str

engt

hen

our

prac

tices

in o

rder

to re

port

su

spic

ious

act

ivity

and

to e

scal

ate

conc

erns

mor

e qu

ickl

y in

tern

ally

and

with

the

appr

opri

ate

regu

lato

rs.

For

exam

ple,

we

are:

and

Fina

ncia

l Int

ellig

ence

uni

ts

qual

ity o

f our

iden

tifica

tion,

revi

ew a

nd re

port

ing

of

pote

ntia

lly s

uspi

ciou

s ac

tivity

to p

erm

it th

e ex

chan

ge o

f SAR

-rel

ated

info

rmat

ion

from

oth

er c

ount

ries

to th

e Un

ited

Stat

es w

here

pe

rmitt

ed b

y lo

cal r

egul

atio

n

CON

TRO

L FU

NCT

ION

SH

OW

WE

DO

BU

SIN

ESS

— O

UR

CO

NTR

OL

ENV

IRO

NM

ENT

54 Case

stu

dy: F

orei

gn c

orre

spon

dent

ban

king

Our

fore

ign

corr

espo

nden

t ban

king

act

iviti

es in

volv

e se

ndin

g an

d/or

rece

ivin

g U.

S. d

olla

r-de

nom

inat

ed

paym

ents

or

hand

ling

othe

r U.

S.-b

ased

fina

ncia

l tra

ns-

actio

ns o

n be

half

of a

non

-U.S

. fina

ncia

l ins

titut

ion.

Th

ese

activ

ities

hav

e co

me

unde

r si

gnifi

cant

scr

utin

y by

re

gula

tors

, ind

ustr

y-w

ide,

bec

ause

of c

erta

in in

here

nt

risk

s in

the

busi

ness

.

As a

resu

lt, w

e re

view

ed o

ur c

ontr

ols

arou

nd th

is

busi

ness

, inc

ludi

ng o

ur in

tern

al p

olic

ies,

pro

cess

es a

nd

tech

nolo

gy, t

o un

ders

tand

whe

re w

e ne

ed to

impr

ove.

W

e re

view

ed th

e te

chno

logy

we

use

to m

onito

r tr

ans-

actio

ns a

nd th

e pr

oces

ses

for

perf

orm

ing

due

dilig

ence

on

our

clie

nts.

We

also

rev

iew

ed o

ur r

isk

tole

ranc

e ac

ross

sel

ecte

d co

untr

ies,

reg

ions

and

pro

duct

s fo

r ou

r co

rres

pond

ent b

anki

ng b

usin

ess.

Thi

s an

alys

is le

d us

to

conc

lude

that

we

need

ed to

upg

rade

our

con

trol

env

i-ro

nmen

t and

sys

tem

s an

d to

ded

icat

e m

ore

reso

urce

s to

KYC

, tra

nsac

tion

mon

itori

ng a

nd e

scal

atio

n in

ord

er

to c

ontin

ue to

ser

ve o

ur c

lient

s w

hile

man

agin

g ou

r ri

sk p

rofil

e.

One

of t

he c

onse

quen

ces

of o

ur re

view

was

the

deci

sion

to

exi

t man

y re

latio

nshi

ps w

ith fo

reig

n co

rres

pond

ent

bank

s, in

som

e ca

ses,

unt

il ou

r co

ntro

ls a

re b

ette

r ab

le

to m

anag

e th

ese

rela

tions

hips

. The

se d

ecis

ions

wer

e dr

iven

by

two

cons

ider

atio

ns:

1.

Risk

-rel

ated

con

cern

s

2.

Busi

ness

sim

plifi

catio

n, w

hich

allo

ws

us to

str

eam

-lin

e ou

r po

rtfo

lio a

nd fo

cus

due

dilig

ence

on

less

ri

sky

clie

nts

Prio

r to

exi

ting

a cl

ient

rel

atio

nshi

p, w

e w

ork

to h

elp

the

clie

nt fi

nd a

rep

lace

men

t U.S

. dol

lar

prov

ider

, if

poss

ible

; dis

cuss

pot

entia

l mar

ket r

isks

with

the

rele

vant

reg

ulat

ors;

and

ens

ure

the

deci

sion

is c

omm

u-ni

cate

d in

a c

oord

inat

ed a

nd c

onsi

sten

t way

acr

oss

all

part

s of

the

com

pany

.

We

rem

ain

com

mitt

ed to

the

fore

ign

corr

espo

nden

t ba

nkin

g bu

sine

ss. F

or th

ose

clie

nts

with

who

m w

e co

ntin

ue to

wor

k, w

e ar

e co

nduc

ting

enha

nced

due

di

ligen

ce a

nd re

view

with

eac

h on

e th

e ty

pes

of a

ctiv

ities

w

e w

ill c

ontin

ue to

sup

port

.

In o

rder

to im

plem

ent t

hese

ste

ps, w

e:

Offi

ce to

coo

rdin

ate

fore

ign

corr

espo

nden

t ban

king

de

-ris

king

act

iviti

es

to s

uppo

rt th

e fo

reig

n co

rres

pond

ent b

anki

ng

de-r

iski

ng e

ffort

thro

ugh

cros

s-lin

e of

bus

ines

s re

view

s an

d co

mm

unic

atio

ns o

f clie

nt r

isk

and

si

mpl

ifica

tion

deci

sion

s

Alon

g w

ith th

e re

latio

nshi

p ex

its, w

e ha

ve ta

ken

seve

ral

step

s to

impr

ove

our c

ontr

ols

for f

orei

gn c

orre

spon

dent

ba

nkin

g ac

tiviti

es, i

nclu

ding

:

mon

itor U

.S. d

olla

r-de

nom

inat

ed c

orre

spon

dent

ba

nkin

g tr

ansa

ctio

ns o

f for

eign

cor

resp

onde

nt b

anks

. Th

is in

clud

ed im

plem

entin

g 10

new

tran

sact

ion

mon

i-to

ring

rule

s to

trac

k m

illio

ns o

f tra

nsac

tions

eac

h da

y

both

Com

plia

nce

and

busi

ness

exe

cutiv

es, t

o re

view

ou

r cl

ient

por

tfolio

list

s an

d as

sess

and

man

age

any

risk

s pr

esen

ted

by p

artic

ular

clie

nts

Com

mitt

ee to

gov

ern

polic

ies

and

appr

ove

new

bu

sine

ss o

ppor

tuni

ties

HO

W W

E D

O B

USI

NES

S —

OU

R C

ON

TRO

L EN

VIR

ON

MEN

T5454

HO

W W

E D

O B

USI

NES

S —

OU

R C

ON

TRO

L EN

VIR

ON

MEN

TCO

NTR

OL

FUN

CTIO

NS

HO

W W

E D

O B

USI

NES

S —

OU

R C

ON

TRO

L EN

VIR

ON

MEN

T55

Lega

l

Lega

l ser

ves

a va

riet

y of

func

tions

, man

y of

whi

ch

are

cont

rol r

elat

ed. O

ur la

wye

rs p

rovi

de le

gal a

dvic

e to

our

Boa

rd, o

ur li

nes

of b

usin

ess

and

our c

orpo

rate

fu

nctio

ns a

nd a

ssis

t Ove

rsig

ht &

Con

trol

, Ris

k, F

inan

ce,

Com

plia

nce

and

Inte

rnal

Aud

it in

thei

r effo

rts

to e

nsur

e co

mpl

ianc

e w

ith a

ll ap

plic

able

law

s an

d re

gula

tions

and

ou

r cor

pora

te s

tand

ards

for d

oing

bus

ines

s. L

egal

als

o w

orks

to p

rote

ct th

e re

puta

tion

of th

e co

mpa

ny b

eyon

d an

y pa

rtic

ular

lega

l req

uire

men

ts. F

inal

ly, o

ur la

wye

rs

perf

orm

a s

igni

fican

t def

ense

and

adv

ocac

y ro

le, w

orki

ng

with

out

side

cou

nsel

to a

sses

s an

d, a

s ap

prop

riate

, de

fend

the

com

pany

aga

inst

cla

ims

and

pote

ntia

l cla

ims

and,

whe

n ne

eded

, to

purs

ue c

laim

s ag

ains

t oth

ers

also

.

In e

ach

aspe

ct o

f its

role

, Leg

al h

as o

ne c

lient

: the

co

mpa

ny. I

n th

e w

ake

of th

e fin

anci

al c

risis

, the

num

ber

and

com

plex

ity o

f reg

ulat

ory

requ

irem

ents

affe

ctin

g th

e co

mpa

ny h

ave

incr

ease

d dr

amat

ical

ly; t

heir

enfo

rcem

ent

has

beco

me

stric

ter;

the

num

ber o

f int

erna

tiona

l, fe

dera

l, st

ate

and

loca

l age

ncie

s en

forc

ing

them

has

incr

ease

d;

and

the

pena

lties

for v

iola

tions

hav

e ris

en s

ubst

antia

lly.

Thus

, mak

ing

the

com

pany

fully

aw

are

of it

s le

gal o

blig

a-tio

ns h

as b

ecom

e m

ore

impo

rtan

t tha

n ev

er.

Org

aniz

atio

n an

d go

vern

ance

The

com

pany

’s G

ener

al C

ouns

el r

epor

ts to

the

CEO

and

is

a m

embe

r of

the

Ope

ratin

g Co

mm

ittee

, the

Fir

mw

ide

Risk

Com

mitt

ee a

nd th

e Fi

rmw

ide

Cont

rol C

omm

ittee

. H

is le

ader

ship

team

incl

udes

a G

ener

al C

ouns

el fo

r ea

ch li

ne o

f bus

ines

s, th

e he

ad o

f the

Liti

gatio

n,

Corp

orat

e &

Reg

ulat

ory

and

Glob

al F

inan

cial

Cri

mes

Co

mpl

ianc

e fu

nctio

ns, a

s w

ell a

s a

Chie

f Ope

ratin

g O

ffice

r an

d th

e co

mpa

ny’s

Cor

pora

te S

ecre

tary

. Eac

h re

gion

(e.g

., La

tin A

mer

ica,

Asi

a Pa

cific

) has

a G

ener

al

Coun

sel w

ho is

res

pons

ible

for

man

agin

g le

gal r

isk

acro

ss a

ll lin

es o

f bus

ines

s an

d fu

nctio

ns in

the

regi

on.

We

have

incr

ease

d st

affing

in a

n eff

ort t

o en

sure

we

have

eno

ugh

qual

ity la

wye

rs a

dvis

ing

our

busi

ness

es

so th

at, o

ver

time,

we

may

ach

ieve

our

goa

l of r

educ

ing

the

inci

denc

e of

reg

ulat

ory

and

litig

atio

n m

atte

rs. T

he

incr

ease

d st

affing

als

o pr

ovid

es r

esou

rces

to d

efen

d th

e co

mpa

ny a

nd to

red

uce

the

cost

that

com

es w

ith

use

of o

utsi

de c

ouns

el.

The

size

of L

egal

has

gro

wn

from

aro

und

850

law

yers

in

201

2 to

mor

e th

an 1

,000

in 2

013,

with

a p

roje

ctio

n of

ap

prox

imat

ely

1,20

0 at

the

end

of 2

014.

Incl

udin

g pa

ra-

lega

ls a

nd o

ther

sup

port

sta

ff, th

e to

tal s

taff

size

by

the

end

of 2

014

is e

xpec

ted

to b

e ap

prox

imat

ely

1,950

.

Tech

nolo

gy a

nd tr

aini

ng

Lega

l is

inve

stin

g in

tech

nolo

gy a

nd tr

aini

ng, w

ith a

fo

cus

on g

ivin

g ou

r pe

ople

the

tool

s to

do

thei

r jo

b

wel

l. In

vest

men

t in

tech

nolo

gy fo

r Le

gal h

as in

crea

sed

m

ore

than

five

fold

sin

ce 2

012.

Tec

hnol

ogy

and

trai

ning

in

itiat

ives

incl

ude:

syst

em to

sto

re le

gal w

orki

ng p

aper

s ce

ntra

lly, w

ith

the

abili

ty to

tie

docu

men

ts to

lega

l mat

ters

and

sh

are

and

colla

bora

te o

n do

cum

ents

acr

oss

team

s

on o

ur in

telle

ctua

l pro

pert

y an

d gl

obal

regu

latio

ns

on d

ata

priv

acy

and

secu

rity

to o

ffer

trai

ning

to e

mpl

oyee

s w

orld

wid

e so

they

re

mai

n co

nver

sant

with

exi

stin

g an

d ne

w r

egul

a-to

ry o

blig

atio

ns

CON

TRO

L FU

NCT

ION

SH

OW

WE

DO

BU

SIN

ESS

— O

UR

CO

NTR

OL

ENV

IRO

NM

ENT

56 Lega

l pro

cess

es

A ke

y re

spon

sibi

lity

of o

ur c

ompa

ny’s

law

yers

is to

co

nduc

t cer

tain

lega

l pro

cess

es, s

uch

as h

andl

ing

of

lega

l pap

ers

serv

ed, s

ubpo

ena

com

plia

nce,

lega

l ent

ity

trac

king

and

regu

lato

ry re

port

ing,

and

est

imat

ion

of

lega

l res

erve

s. W

e ar

e si

gnifi

cant

ly in

crea

sing

reso

urce

s de

vote

d to

thes

e fu

nctio

ns. T

his

has

mea

nt b

ring

ing

in

proc

ess

expe

rts

and

build

ing

team

s to

impl

emen

t new

st

ruct

ures

for

gett

ing

this

wor

k do

ne.

One

of o

ur m

ore

sign

ifica

nt o

pera

tiona

l iss

ues

has

been

th

e ex

ecut

ion

of s

wor

n do

cum

ents

use

d in

litig

atio

n pr

ocee

ding

s, p

artic

ular

ly in

our

con

sum

er b

usin

ess

colle

ctio

n eff

orts

. In

sim

ples

t ter

ms,

a s

wor

n do

cum

ent i

s w

ritte

n te

stim

ony.

In o

ur c

ase,

it w

ould

be

a st

atem

ent b

y a

com

pany

repr

esen

tativ

e un

der o

ath,

whi

ch is

sub

mitt

ed

to a

cou

rt, g

over

nmen

tal a

genc

y or

sel

f-reg

ulat

ory

agen

cy. W

e ex

ecut

e ar

ound

90,

000

swor

n do

cum

ents

m

onth

ly a

cros

s al

l lin

es o

f bus

ines

s an

d co

rpor

ate

func

tions

. We

have

mad

e a

num

ber o

f enh

ance

men

ts to

im

prov

e sw

orn

docu

men

t exe

cutio

n, in

clud

ing:

prop

er s

uper

visi

on o

f sw

orn

docu

men

ts a

ctiv

ities

at

the

com

pany

cont

rols

and

trai

ning

to s

uppo

rt th

e pr

oper

exe

cutio

n of

sw

orn

docu

men

ts

solu

tion

that

will

pro

vide

sev

eral

key

func

tions

, in

clud

ing

trac

king

, inv

ento

ry a

nd q

ualit

y as

sura

nce

Lega

l pri

orit

ies

Lega

l has

est

ablis

hed

a se

ries

of p

rior

ities

that

re

pres

ent t

he m

anne

r in

whi

ch th

e Le

gal f

unct

ion

seek

s to

sup

port

the

com

pany

’s eff

orts

to e

nsur

e th

at th

e bu

sine

ss it

doe

s is

in c

ompl

ianc

e w

ith a

ll ap

plic

able

law

s an

d re

gula

tions

and

mee

ts o

ur c

orpo

rate

sta

ndar

ds fo

r do

ing

busi

ness

. The

y in

clud

e:

Exec

utin

g. It

is im

port

ant t

o dr

ive

issu

es to

com

ple-

tion

and

to d

o so

with

a s

ense

of u

rgen

cy. T

his

incl

udes

ask

ing

for

help

if n

eede

d. It

als

o m

eans

not

as

sum

ing

that

som

eone

els

e is

han

dlin

g a

prob

lem

Serv

ing

the

clie

nt. S

ervi

ng th

e cl

ient

mea

ns s

afe-

guar

ding

the

com

pany

’s re

puta

tion.

Tha

t req

uire

s se

rvin

g as

a tr

uste

d ad

viso

r and

kno

win

g w

hen

to s

ay

“no.

” In

all

circ

umst

ance

s, it

requ

ires

care

ful a

naly

sis,

cl

ear-

head

ed th

inki

ng a

nd ro

bust

com

mun

icat

ion

—

and,

of c

ours

e, d

edic

atio

n an

d pr

ofes

sion

alis

m

Mak

ing

sure

we

don’

t rep

eat o

ur m

ista

kes.

We

mus

t le

arn

and

teac

h le

sson

s th

at a

re e

mbe

dded

in e

xam

-in

atio

ns, r

egul

ator

y or

ders

and

set

tlem

ents

Colla

bora

ting

. Our

law

yers

nee

d to

col

labo

rate

with

in

the

func

tion,

am

ong

the

cont

rol f

unct

ions

and

acr

oss

the

lines

of b

usin

ess

Esca

latin

g. E

scal

atin

g a

prob

lem

not

onl

y ad

ds a

se

cond

per

spec

tive

but o

ften

a b

road

er p

ersp

ec-

tive.

It is

a c

ore

oblig

atio

n of

any

law

yer

at th

e co

mpa

ny to

esc

alat

e pr

oble

ms

and

not h

andl

e si

gnifi

cant

pro

blem

s al

one.

Get

ting

the

righ

t peo

ple

invo

lved

is c

ruci

al

Enha

ncin

g di

alog

ue w

ith

our

regu

lato

rs. O

ur c

omm

u-ni

catio

ns w

ith re

gula

tors

mus

t be

timel

y an

d ac

cura

te. T

hat m

eans

ack

now

ledg

ing

whe

n on

e do

esn’

t kno

w th

e fa

cts

and

follo

win

g up

qui

ckly

whe

n th

ose

fact

s ar

e es

tabl

ishe

d. W

hile

par

t of a

law

yer’s

jo

b is

to a

dvoc

ate,

he

or s

he m

ust d

o so

hon

estly

and

re

spec

tful

ly a

nd w

ithou

t sac

rific

ing

cred

ibili

ty

CON

TRO

L FU

NCT

ION

S

HO

W W

E D

O B

USI

NES

S —

OU

R C

ON

TRO

L EN

VIR

ON

MEN

T57

INTE

RN

AL

AU

DIT

The

Inte

rnal

Aud

it gr

oup

prov

ides

the

Boar

d of

D

irec

tors

’ Aud

it Co

mm

ittee

, sen

ior

man

agem

ent a

nd

our

regu

lato

rs w

ith a

n in

depe

nden

t ass

essm

ent o

f the

co

mpa

ny’s

abi

lity

to m

anag

e an

d co

ntro

l ris

k ba

sed

on a

n ev

alua

tion

of th

e co

mpa

ny’s

inte

rnal

con

trol

st

ruct

ure

and

com

plia

nce

with

app

licab

le la

ws

and

regu

latio

ns. A

t its

cor

e, th

e gr

oup

help

s th

e co

mpa

ny

acco

mpl

ish

its o

bjec

tives

by

brin

ging

a s

yste

mat

ic,

disc

iplin

ed a

ppro

ach

to e

valu

ate

risk

man

agem

ent

and

cont

rol a

nd g

over

nanc

e pr

oces

ses

and,

ther

eby,

co

ntri

bute

to th

eir

impr

ovem

ent.

Inte

rnal

Aud

it is

an

inde

pend

ent f

unct

ion

with

in th

e co

mpa

ny a

nd is

led

by th

e co

mpa

ny’s

Gene

ral A

udito

r. In

depe

nden

ce is

fund

amen

tal t

o th

e au

dit p

roce

ss a

nd

esse

ntia

l to

its e

ffect

iven

ess.

Inde

pend

ence

is a

chie

ved

thro

ugh

the

orga

niza

tiona

l str

uctu

re —

the

Gene

ral

Audi

tor

func

tiona

lly re

port

s di

rect

ly to

the

Boar

d of

Di

rect

ors’

Aud

it Co

mm

ittee

and

adm

inis

trat

ivel

y to

the

CEO

— a

nd b

y th

e ap

plic

atio

n of

inte

llect

ual h

ones

ty

and

obje

ctiv

ity in

dra

win

g co

nclu

sion

s w

ithou

t bia

s or

ou

tsid

e in

fluen

ce.

Org

aniz

atio

n

The

Inte

rnal

Aud

it gr

oup

has

mad

e m

ajor

enh

ance

men

ts

to it

s or

gani

zatio

n. A

focu

s on

mor

e gr

anul

ar a

nd m

ore

freq

uent

aud

it co

vera

ge, a

nd in

crea

sed

regu

lato

ry

requ

irem

ents

and

/or

expe

cted

wor

k, c

ontin

ue to

dri

ve

reso

urce

gro

wth

. Our

cor

e In

tern

al A

udit

head

coun

t gr

ew s

igni

fican

tly in

201

3 —

up

15%

from

the

2012

leve

l —

and

will

incr

ease

by

an a

dditi

onal

15%

by

year

-end

20

14. O

ther

enh

ance

men

ts in

clud

e:

to im

prov

e ou

r or

gani

zatio

n’s

effec

tiven

ess,

in

clud

ing

crea

ting

a ne

w C

hief

Aud

itor

of R

isk

role

and

dev

elop

ing

core

ris

k au

dito

r te

ams

that

pa

rtne

r w

ith li

ne o

f bus

ines

s au

dit t

eam

s w

ith th

e ob

ject

ive

of e

nsur

ing

that

the

cove

rage

of r

isk

is

com

plet

e an

d co

mpr

ehen

sive

issu

es w

ith th

e ai

m o

f ide

ntify

ing

risk

s ac

ross

line

s of

bus

ines

s an

d fu

rthe

r en

hanc

ing

a cr

oss-

busi

ness

m

inds

et w

ithin

Inte

rnal

Aud

it

esta

blis

hing

a n

ew ro

le, D

irect

or o

f Tra

inin

g, to

dri

ve

a st

rate

gic

trai

ning

age

nda

acro

ss th

e fu

nctio

n

Prac

tice

s an

d pr

oces

ses

We

cont

inua

lly a

sses

s an

d im

prov

e au

dit p

olic

ies

and

proc

esse

s in

resp

onse

to in

tern

al q

ualit

y as

sura

nce

resu

lts, i

ndus

try

guid

ance

and

bes

t pra

ctic

es, a

nd re

gu-

lato

ry e

xpec

tatio

ns. W

e ha

ve m

ade

a nu

mbe

r of

cha

nges

to

our

pra

ctic

es to

bet

ter

posi

tion

Inte

rnal

Aud

it to

pr

ovid

e ap

prop

riat

e co

vera

ge o

f key

ris

ks. W

e ha

ve

mad

e im

prov

emen

ts in

the

follo

win

g ar

eas,

incl

udin

g,

amon

g ot

hers

:

Bank

Sec

recy

Act

/Ant

i-Mon

ey L

aund

erin

g la

ws

and

Offi

ce o

f For

eign

Ass

ets

Cont

rol.

In Ju

ne

2013

, we

rolle

d ou

t a fo

rmal

pro

gram

to a

rtic

ulat

e th

e ap

proa

ch a

nd fr

amew

ork

for

cond

uctin

g au

dit

activ

ities

for

the

com

pany

’s Ba

nk S

ecre

cy A

ct/A

nti-

Mon

ey L

aund

erin

g la

ws

and

Offi

ce o

f For

eign

Ass

ets

Cont

rol/

Sanc

tions

firm

wid

e pr

ogra

ms.

Risk

and

con

trol

sel

f-as

sess

men

t. W

e re

vise

d th

e au

dit t

estin

g ap

proa

ch r

elat

ed to

a r

isk

and

cont

rol

self-

asse

ssm

ent.

Elem

ents

test

ed in

clud

e ke

y go

vern

ance

and

ove

rsig

ht c

ompo

nent

s; in

here

nt

risk

com

posi

tion

and

ratin

gs; c

ontr

ol e

ffect

ive-

ness

com

posi

tion,

sub

stan

tiatio

n an

d de

sign

; and

re

sidu

al r

isk.

Polic

y im

prov

emen

ts. I

n O

ctob

er 2

014,

we

enha

nced

po

licie

s re

late

d to

aud

it co

vera

ge o

f the

firm

wid

e N

ew B

usin

ess

Initi

ativ

e Ap

prov

al p

rogr

am a

nd T

hird

-Pa

rty

Ove

rsig

ht p

rogr

am to

fost

er c

onsi

sten

cy a

cros

s au

dit t

eam

s in

ris

k as

sess

men

t, au

dit t

estin

g an

d co

ntin

uous

mon

itori

ng a

ctiv

ities

.

INTE

RN

AL

AU

DIT

H

OW

WE

DO

BU

SIN

ESS

— O

UR

CO

NTR

OL

ENV

IRO

NM

ENT

58

Subj

ect M

atte

r Ex

pert

pro

gram

. We

solid

ified

our

ap

proa

ch to

sub

ject

mat

ter

expe

rtis

e by

dev

elop

ing

a fo

rmal

Sub

ject

Mat

ter

Expe

rt p

rogr

am in

June

20

13. T

he p

urpo

se o

f the

pro

gram

is to

ena

ble

mor

e co

mpr

ehen

sive

and

con

sist

ent a

udit

cove

rage

of

cert

ain

topi

cs, d

evel

op a

nd m

aint

ain

expe

rtis

e in

ce

rtai

n su

bjec

t are

as, a

nd id

entif

y cr

oss-

busi

ness

is

sues

and

tren

ds a

nd th

en to

com

mun

icat

e th

ose

findi

ngs

acro

ss a

udit

team

s to

effe

ct c

hang

es to

pl

anne

d co

vera

ge.

Enha

nced

Qua

lity

Assu

ranc

e pr

ogra

m. A

lso

in Ju

ne

2013

, we

expa

nded

our

Qua

lity

Assu

ranc

e pr

ogra

m

and

appr

oach

to fa

cilit

ate

an a

sses

smen

t of o

vera

ll au

dit c

over

age.

The

app

roac

h en

com

pass

es a

ll ac

tiv-

ities

of a

n au

dit t

eam

, inc

ludi

ng a

udit

plan

adm

in-

istr

atio

n, a

udits

, exe

cutiv

e m

anag

emen

t rep

ortin

g,

issu

e cl

osur

e va

lidat

ion,

con

tinuo

us a

uditi

ng a

ctiv

ities

an

d ch

ange

eve

nts

(i.e.

, any

act

ivity

that

has

sig

nif-

ican

t im

pact

on

the

cont

rol e

nviro

nmen

t, in

clud

ing,

fo

r exa

mpl

e, n

ew p

rodu

cts

and

new

acc

ount

ing

pron

ounc

emen

ts).

The

Qual

ity A

ssur

ance

team

de

scrib

ed a

bove

adm

inis

ters

the

prog

ram

.

Trai

ning

str

ateg

y. W

e re

cent

ly la

unch

ed a

mor

e co

mpr

ehen

sive

trai

ning

str

ateg

y fo

cuse

d on

dev

el-

opm

ent o

f pro

fess

iona

l ski

lls, t

echn

ical

ski

lls a

nd

prod

uct k

now

ledg

e.

Take

n to

geth

er, t

he c

ompa

ny’s

effor

ts to

sim

plify

and

de

-ris

k ou

r bus

ines

s, a

long

with

our

inve

stm

ents

and

im

prov

emen

ts a

cros

s th

e bu

sine

sses

, Ove

rsig

ht &

Con

trol

, Ri

sk, F

inan

ce, C

ompl

ianc

e, L

egal

and

Inte

rnal

Aud

it re

pres

ent o

ne o

f the

larg

est u

nder

taki

ngs

in o

ur h

isto

ry.

The

resu

lt is

an

infr

astr

uctu

re a

nd fi

rmw

ide

focu

s on

eff

ectiv

e co

ntro

ls b

eyon

d w

hat w

e ha

ve d

one

befo

re.

Thes

e fa

r-re

achi

ng s

teps

are

the

right

thin

g to

do

for o

ur

com

pany

. We

know

we

have

mor

e w

ork

to d

o, a

nd w

e re

cogn

ize

the

need

for c

ontin

ued

vigi

lanc

e to

ass

ess

and

ensu

re th

e eff

ectiv

enes

s of

our

con

trol

s ov

er ti

me.

INTE

RN

AL

AU

DIT

IV.

OU

R C

UST

OM

ER C

OM

MIT

MEN

T

HO

W W

E D

O B

USI

NES

S —

OU

R C

UST

OM

ER C

OM

MIT

MEN

T61

CON

SUM

ER &

CO

MM

UN

ITY

BAN

KIN

G

OU

R C

UST

OM

ER C

OM

MIT

MEN

T

We

oper

ate

thro

ugh

four

dis

tinct

line

s of

bus

ines

s w

ith

one

com

mon

goa

l: se

rvin

g ou

r cu

stom

ers.

Col

lect

ivel

y,

we

wor

k ha

nd in

han

d w

ith m

illio

ns o

f con

sum

ers

and

smal

l bus

ines

ses,

as

wel

l as

man

y of

the

wor

ld’s

mos

t pr

omin

ent c

orpo

rate

, ins

titut

iona

l and

gov

ernm

ent

clie

nts,

to m

eet t

he fu

ll br

eadt

h of

thei

r fin

anci

al n

eeds

. O

ur w

ork

incl

udes

:

daily

fina

nces

and

sav

e an

d in

vest

for

the

futu

re,

from

pur

chas

ing

a ne

w h

ome

to fu

ndin

g a

colle

ge

educ

atio

n or

retir

emen

t

and

mid

-siz

e bu

sine

sses

, spu

rrin

g jo

b cr

eatio

n in

lo

cal m

arke

ts a

nd b

uild

ing

vibr

ant c

omm

uniti

es

optio

ns a

nd s

tren

gthe

n th

eir

capi

tal p

ositi

on,

enab

ling

them

to re

inve

st in

thei

r bu

sine

sses

and

m

eet t

heir

long

-ter

m g

oals

capi

tal t

o w

ork,

from

loca

l gov

ernm

ents

inve

stin

g in

in

fras

truc

ture

to p

ensi

on fu

nds

gene

ratin

g re

turn

s fo

r th

eir

bene

ficia

ries

Each

of o

ur b

usin

esse

s fo

cuse

s on

way

s to

impr

ove

serv

ices

cus

tom

ers

wan

t and

by

mak

ing

it ea

sier

for t

hem

to

do

busi

ness

with

us.

In th

is s

ectio

n, w

e de

scrib

e so

me

of th

e sp

ecifi

c st

eps

our l

ines

of b

usin

ess

have

take

n.

CON

SUM

ER &

CO

MM

UN

ITY

BA

NK

ING

Acro

ss th

e co

mpa

ny, w

e be

lieve

that

whe

n w

e tr

eat

peop

le w

ell,

they

will

wan

t to

do m

ore

busi

ness

with

us

. Tha

t is

why

Con

sum

er &

Com

mun

ity B

anki

ng (C

CB)

has

focu

sed

on d

efini

ng th

e ke

ys to

a g

reat

cus

tom

er

trai

ning

, we

mea

sure

our

suc

cess

thro

ugh

cust

omer

fe

edba

ck, a

nd w

e m

ake

sure

our

pro

duct

s an

d se

rvic

es

keep

up

with

cha

ngin

g cu

stom

er n

eeds

.

The

Cust

omer

Exp

erie

nce

In 2

011,

regi

onal

and

dis

tric

t lea

ders

from

our

bra

nche

s ca

me

toge

ther

from

acr

oss

the

coun

try

to d

evel

op a

co

mm

on s

et o

f cus

tom

er s

ervi

ce p

rinci

ples

, cal

led

the

Five

1.

Alw

ays

be c

ourt

eous

and

pro

fess

iona

l

2.

Do th

e ri

ght t

hing

3.

Build

last

ing

rela

tions

hips

4. O

wn

cust

omer

issu

es s

tart

to fi

nish

Our

139

,000

em

ploy

ees

acro

ss C

CB —

from

cus

tom

er-

faci

ng b

anke

rs a

nd c

all c

ente

r sp

ecia

lists

to o

pera

-tio

ns c

olle

ague

s —

em

brac

e th

ese

Five

Key

s to

a G

reat

with

cus

tom

ers.

S

ince

we

intr

oduc

ed th

e Fi

ve K

eys,

we

have

bec

ome

#1

in c

usto

mer

sat

isfa

ctio

n am

ong

the

larg

est

U.S

. ban

ks, a

ccor

ding

to th

e A

mer

ican

Cus

tom

er S

atis

fact

ion

Inde

x. W

e al

so h

ave

subs

tant

ially

im

prov

ed o

ur J

.D. P

ower

cus

tom

er s

atis

fact

ion

rank

ings

:

HO

W W

E D

O B

USI

NES

S —

OU

R C

UST

OM

ER C

OM

MIT

MEN

T62 Im

plem

enti

ng fr

ont-

line

empl

oyee

s’

advi

ce

We

also

are

see

king

mor

e ad

vice

from

our

fron

t-lin

e em

ploy

ees.

The

y in

tera

ct d

irect

ly w

ith o

ur c

usto

mer

s an

d kn

ow th

e lit

tle a

nd b

ig th

ings

we

can

do to

impr

ove

the

cust

omer

’s ex

peri

ence

. Alto

geth

er, e

mpl

oyee

fe

edba

ck h

as g

ener

ated

mor

e th

an 1

,100

impr

ovem

ents

to

cus

tom

er s

ervi

ce o

ver

the

past

two

year

s, in

clud

ing:

Conn

ect a

nd in

trod

uce.

Whe

n te

leph

one

bank

ing

spec

ialis

ts n

eed

to tr

ansf

er a

cal

l to

a co

lleag

ue

bett

er e

quip

ped

to h

andl

e th

e is

sue,

they

dro

p off

th

e lin

e on

ly a

fter

intr

oduc

ing

the

clie

nt, s

umm

a-ri

zing

the

issu

e an

d as

king

the

cust

omer

if h

e or

she

is

com

fort

able

with

the

tran

sfer

Ask

toda

y, s

ee to

day.

Cus

tom

ers

can

see

upda

ted

info

rmat

ion,

suc

h as

a fe

e re

fund

or

a ne

w a

ddre

ss,

on C

hase

Onl

ine

with

in m

inut

es o

f req

uest

ing

chan

ges

for

chec

king

and

sav

ings

acc

ount

s

Get t

o a

hum

an. C

usto

mer

s ca

lling

on

the

tele

phon

e ca

n qu

ickl

y sp

eak

with

a b

anki

ng s

peci

alis

t rat

her

than

hav

ing

to p

ush

seve

ral b

utto

ns

Trea

ting

cus

tom

ers

fair

ly

As w

e w

ork

to d

eliv

er p

rodu

cts

and

serv

ices

that

offe

r a

cons

iste

nt a

nd e

xcep

tiona

l cus

tom

er e

xper

ienc

e, w

e al

so

reco

gniz

e th

at fa

irnes

s m

ust b

e th

e fo

unda

tion

of o

ur re

la-

tions

hip

with

eve

ry c

usto

mer

. Ind

eed,

trea

ting

cust

omer

s fa

irly

is a

cor

e pr

inci

ple

in o

ur B

usin

ess

Prin

cipl

es.

To m

ake

sure

we

live

up to

this

sta

ndar

d, w

e ha

ve la

id

out p

rinc

iple

s an

d pr

oced

ures

to e

nsur

e fa

ir tr

eatm

ent

of c

usto

mer

s; w

orke

d to

sim

plify

our

dis

clos

ures

, pr

oduc

ts a

nd s

ervi

ces,

and

ope

ratio

ns; a

nd e

nhan

ced

our

effor

ts to

list

en a

nd re

spon

d to

cus

tom

er fe

edba

ck.

Thes

e eff

orts

hav

e be

en b

olst

ered

by

the

esta

blis

hmen

t of

a d

istin

ct in

tern

al C

onsu

mer

& C

omm

unity

Pra

ctic

es

grou

p to

adv

ocat

e fo

r cu

stom

ers

and

driv

e si

mpl

icity

an

d cl

arity

into

our

bus

ines

s m

odel

. We

also

hav

e

initi

ated

a C

usto

mer

Com

mun

icat

ions

Cou

ncil

to re

view

se

rvic

ing

lett

ers

acro

ss C

CB a

nd to

ens

ure

that

bot

h th

e fo

rmat

and

lang

uage

exp

lain

sim

ply,

cle

arly

and

co

ncis

ely

wha

t the

cus

tom

er n

eeds

to k

now

and

do.

CCB

lead

ersh

ip w

orks

to e

nsur

e th

at w

e ad

here

to th

ese

prin

cipl

es th

roug

h va

riou

s fo

rum

s, in

clud

ing

thro

ugh

(1)

a co

mpl

aint

foru

m w

here

CCB

lead

ers

revi

ew c

usto

mer

co

mpl

aint

s an

d re

com

men

d ch

ange

s an

d (2

) rem

edia

-tio

n w

orki

ng g

roup

s th

at re

view

tech

nolo

gy in

cide

nts

and

prod

uct a

nd m

arke

ting

chan

ges

that

may

hav

e ad

vers

ely

affec

ted

cust

omer

s.

Evol

ving

to s

erve

our

cus

tom

ers’

ch

angi

ng n

eeds

We

wan

t to

serv

e cu

stom

ers

in th

e ch

anne

ls in

whi

ch

they

wan

t to

be s

erve

d. In

crea

sing

ly, t

hat m

eans

di

gita

l and

mob

ile. N

earl

y 36

mill

ion

cust

omer

s us

e ch

ase.

com

regu

larl

y, a

nd 1

8 m

illio

n pe

ople

use

Cha

se

Mob

ile. T

oday

, Cha

se c

usto

mer

s m

ake

mor

e th

an h

alf

thei

r de

posi

ts a

t an

ATM

or

with

a p

ictu

re o

f a c

heck

ta

ken

with

a s

mar

tpho

ne.

That

has

cha

nged

how

cus

tom

ers

use

our

bran

ches

—

so w

e ha

ve c

hang

ed h

ow w

e de

sign

and

sta

ff th

em. W

e ha

ve a

dded

mor

e AT

Ms

to le

t cus

tom

ers

serv

e th

em-

selv

es q

uick

ly a

nd m

ore

bank

ers

to h

elp

cust

omer

s ge

t a m

ortg

age

for

thei

r ho

me,

sav

e fo

r co

llege

and

re

tirem

ent o

r ru

n th

eir

smal

l bus

ines

s. T

o m

ake

thos

e co

nver

satio

ns m

ore

priv

ate,

we

have

add

ed a

dditi

onal

co

nfer

ence

and

mee

ting

room

s.

We

also

con

tinue

to u

pgra

de o

ur o

nlin

e an

d m

obile

se

rvic

es, p

rovi

ding

mor

e in

form

atio

n m

ore

easi

ly a

nd

quic

kly,

as

wel

l as

tapp

ing

into

the

late

st te

chno

logy

, su

ch a

s Ap

ple

Pay.

Ulti

mat

ely,

con

sum

ers

will

cho

ose

how

they

wan

t to

bank

— in

per

son,

via

onl

ine,

thro

ugh

thei

r ph

one

or s

mar

tpho

ne, o

r a

com

bina

tion

of th

ese

optio

ns —

and

with

who

m. I

n CC

B, w

e w

ill c

ontin

ue to

ai

m to

trea

t cus

tom

ers

wel

l in

ever

y in

tera

ctio

n w

e ha

ve

with

them

so

they

will

wan

t to

do m

ore

busi

ness

with

us.

CON

SUM

ER &

CO

MM

UN

ITY

BAN

KIN

G

HO

W W

E D

O B

USI

NES

S —

OU

R C

UST

OM

ER C

OM

MIT

MEN

T63

Case

stu

dy: M

ortg

age

serv

icin

g im

prov

emen

ts

As o

ne o

f the

Uni

ted

Stat

es’ l

arge

st m

ortg

age

lend

ers,

w

e m

ust h

ave

robu

st p

olic

ies,

pro

cess

es a

nd p

roce

-du

res

rela

ting

to fo

recl

osur

es. U

nfor

tuna

tely

, lik

e m

any

in o

ur in

dust

ry, o

ur p

ract

ices

wer

e no

t des

igne

d to

han

dle

the

unpr

eced

ente

d in

crea

se in

vol

ume

that

oc

curr

ed a

s a

resu

lt of

the

finan

cial

cri

sis.

Loo

king

ba

ck, w

e re

cogn

ize

ther

e w

ere

a nu

mbe

r of

are

as

that

nee

ded

enha

ncem

ent —

from

sw

orn

docu

men

t ex

ecut

ion

(to

prev

ent s

o-ca

lled

robo

-sig

ning

) to

gove

r-na

nce

proc

esse

s an

d qu

ality

con

trol

.

Muc

h of

our

wor

k ha

s fo

cuse

d on

impr

ovin

g ou

r op

erat

ing

mod

el in

this

are

a, tr

aini

ng o

ur e

mpl

oyee

s,

impr

ovin

g ou

r cu

stom

er c

omm

unic

atio

ns, e

nhan

cing

ou

r te

chno

logy

pla

tform

s, e

nsur

ing

sust

aina

bilit

y of

our

pr

ogra

ms,

and

dee

peni

ng o

ur re

latio

nshi

ps w

ith o

ur

cust

omer

s, th

ird-

part

y ve

ndor

s an

d ot

her

key

stak

e-ho

lder

s. O

ur g

oal i

s to

del

iver

affo

rdab

le, s

usta

inab

le

and

mea

ning

ful h

ome

pres

erva

tion

assi

stan

ce b

y:

cust

omer

s in

thei

r ho

mes

sign

ifica

nt a

nd m

eani

ngfu

l rel

ief

and

inco

me

leve

ls a

nd a

mon

g pr

otec

ted

clas

ses

Ope

rati

ng m

odel

cha

nges

One

of t

he m

ost i

mpo

rtan

t cha

nges

we

have

mad

e is

ad

optin

g a

new

ope

ratin

g m

odel

that

ass

igns

a s

ingl

e po

int o

f con

tact

— a

Cus

tom

er A

ssis

tanc

e Sp

ecia

list

— to

eac

h cu

stom

er w

ith th

e ke

y be

nefit

of s

tayi

ng

conn

ecte

d to

cus

tom

ers

whe

n th

ey a

re h

avin

g di

ffi-

culty

mak

ing

thei

r pa

ymen

ts. I

n th

is w

ay, w

e ca

n he

lp

cust

omer

s pu

rsue

a lo

an m

odifi

catio

n pr

ogra

m a

t an

earl

y st

age

of d

elin

quen

cy to

avo

id fo

recl

osur

e. O

ther

im

prov

emen

ts in

clud

e:

Cust

omer

Ass

ista

nce

Spec

ialis

t so

team

mem

bers

are

ab

le to

re-e

ngag

e cu

stom

ers

for f

aste

r res

olut

ion

spec

ifica

lly fo

cuse

d on

Ser

vice

mem

bers

Civ

il Re

lief

Act a

nd b

ankr

uptc

y cu

stom

ers

to p

rovi

de th

e de

gree

of

spe

cial

ized

kno

wle

dge

nece

ssar

y to

bes

t sup

port

cu

stom

ers

faci

ng a

fina

ncia

l har

dshi

p

Empl

oyee

trai

ning

Whi

le a

n im

prov

ed o

pera

ting

mod

el is

an

impo

rtan

t fir

st s

tep,

we

also

sou

ght t

o tr

ain

our

empl

oyee

s be

tter

on

how

to s

uppo

rt c

usto

mer

s w

ho a

re h

avin

g di

fficu

lty

mak

ing

paym

ents

. We

have

mad

e gr

eat p

rogr

ess

in

thos

e eff

orts

, inc

ludi

ng:

with

cus

tom

ers

havi

ng d

ifficu

lty m

akin

g pa

ymen

ts.

Nea

rly

100%

of o

ur m

ortg

age

bank

ing

empl

oyee

s w

ho s

erve

cus

tom

ers

faci

ng p

oten

tial f

orec

losu

re

have

take

n pa

rt in

suc

h a

trai

ning

pro

gram

part

icul

ar c

usto

mer

issu

es in

ord

er to

cre

ate

a hi

gh

leve

l of e

xper

tise

by jo

b fu

nctio

n

-te

nt s

uppo

rt a

cros

s op

erat

ing

divi

sion

s

all j

ob fu

nctio

ns

F

orec

losu

re p

reve

ntio

n

fore

clos

ures

sin

ce 2

00

9

mod

ifica

tion

s si

nce

200

9

63H

OW

WE

DO

BU

SIN

ESS

— O

UR

CU

STO

MER

CO

MM

ITM

ENT

CON

SUM

ER &

CO

MM

UN

ITY

BAN

KIN

GH

OW

WE

DO

BU

SIN

ESS

— O

UR

CU

STO

MER

CO

MM

ITM

ENT

64

Fair

ness

to c

usto

mer

s

We

are

com

mitt

ed to

pro

vidi

ng th

e sa

me

fair

trea

tmen

t an

d qu

ality

ser

vice

thro

ugh

the

fore

clos

ure

proc

ess

acro

ss g

eogr

aphi

c re

gion

s an

d in

com

e le

vels

. As

we

have

wor

ked

thro

ugh

this

per

iod

of e

leva

ted

cust

omer

pa

ymen

t diffi

culty

, we

have

wor

ked

clos

ely

with

our

Co

rpor

ate

Fair

Len

ding

par

tner

s to

hel

p en

sure

that

th

e as

sist

ance

we

are

offer

ing

to c

usto

mer

s is

fair

and

eq

uita

ble.

As

part

of t

his

wor

k, w

e co

ntin

ue to

refin

e an

d ex

pand

our

Fai

r Le

ndin

g pr

ogra

m to

ens

ure

that

ne

w p

olic

ies,

pro

cedu

res

and

proc

esse

s ar

e eff

ectiv

ely

impl

emen

ted

and

are

in fu

ll co

mpl

ianc

e w

ith fa

ir le

ndin

g la

ws.

We

also

trac

k cu

stom

er o

utco

mes

clo

sely

to m

ake

sure

that

fore

clos

ure

prev

entio

n ac

tions

are

con

sist

ent

for

the

over

all p

opul

atio

n.

Tech

nolo

gy

As w

e ha

ve d

iscu

ssed

thro

ugho

ut th

is re

port

, one

are

a w

e ar

e co

nsis

tent

ly fo

cuse

d on

impr

ovin

g is

tech

nolo

gy.

That

als

o is

true

in o

ur M

ortg

age

busi

ness

. We

have

in

vest

ed m

ore

than

220

,000

hou

rs o

f our

tech

nolo

gy

empl

oyee

s’ ti

me

to im

prov

e ou

r M

ortg

age

busi

ness

, in

clud

ing:

com

plai

nts

and

resp

onse

s

tech

nolo

gy e

nhan

cem

ent p

roje

cts

rang

ing

from

da

ta q

ualit

y, d

ata

man

agem

ent a

nd a

utom

ated

ex

cept

ion

trac

king

Thes

e en

hanc

emen

ts d

irect

ly s

uppo

rt th

e ne

w b

usin

ess

mod

el, e

nabl

ing

cust

omer

s to

hav

e di

rect

con

tact

with

a

sing

le p

oint

of c

onta

ct a

nd ta

ilori

ng c

omm

unic

atio

ns to

pr

esen

t onl

y th

ose

fore

clos

ure

prev

entio

n op

tions

that

w

e ca

n off

er d

irect

ly to

a c

usto

mer

.

of a

ll tr

aini

ng m

ater

ials

lear

ning

reco

rds

stor

age

core

func

tiona

l rol

es, i

nclu

ding

a m

anag

er le

arni

ng

path

and

sem

iann

ual l

earn

ing

path

revi

ews

to e

nsur

e th

at tr

aini

ng c

onte

nt re

mai

ns re

leva

nt

Cust

omer

com

mun

icat

ions

We

also

hav

e be

en e

nhan

cing

our

com

mun

icat

ions

with

cu

stom

ers

to p

rovi

de b

ette

r co

unse

ling

and

mor

e cl

arity

fo

r cu

stom

ers

abou

t the

ir o

ptio

ns. T

o im

prov

e co

mm

u-ni

catio

ns fo

r cu

stom

ers

cons

ider

ing

way

s to

pre

vent

fo

recl

osur

e, w

e ha

ve:

lett

ing

cust

omer

s kn

ow a

t the

out

set t

he o

ptio

ns a

nd

bene

fits

that

may

be

avai

labl

e to

them

each

cus

tom

er

docu

men

ts a

re c

ompl

eted

in

com

plet

e do

cum

ents

and

freq

uent

sta

tus

upda

tes

C

usto

mer

ser

vice

W

ith

a fo

cus

on s

ervi

ng o

ur c

usto

mer

s,

we

have

mea

sura

bly

impr

oved

our

Serv

icin

g, u

p fr

om #

13 in

20

10, a

nd

#12

in 2

010

.

64H

OW

WE

DO

BU

SIN

ESS

— O

UR

CU

STO

MER

CO

MM

ITM

ENT

CON

SUM

ER &

CO

MM

UN

ITY

BAN

KIN

G

HO

W W

E D

O B

USI

NES

S —

OU

R C

UST

OM

ER C

OM

MIT

MEN

T65

COR

PO

RAT

E &

INV

ESTM

ENT

BA

NK

We

form

ed th

e Co

rpor

ate

& In

vest

men

t Ban

k (C

IB)

in 2

012

by c

ombi

ning

wha

t pre

viou

sly

had

been

two

dist

inct

gro

ups,

the

Inve

stm

ent B

ank

and

Trea

sury

&

Secu

ritie

s Se

rvic

es, t

o st

ream

line

our

serv

ice

to o

ur

clie

nts,

incr

ease

effi

cien

cy a

nd b

ette

r en

able

clie

nt-

faci

ng e

xecu

tives

to p

rese

nt c

oord

inat

ed, i

nnov

ativ

e so

lutio

ns to

the

wor

ld’s

mos

t pro

min

ent c

orpo

ratio

ns,

gove

rnm

ents

and

inst

itutio

ns.

Our

mis

sion

is to

hel

p ou

r clie

nts

succ

eed

— h

owev

er

they

defi

ne it

, whe

ther

they

are

a g

row

ing

corp

orat

ion

look

ing

to ra

ise

capi

tal o

r a

fund

man

ager

see

king

to

outp

erfo

rm a

n in

vest

men

t ben

chm

ark.

With

that

in

min

d, w

e ar

e ac

tivel

y w

orki

ng to

ele

vate

our

sta

ndar

ds

and

mor

e cl

osel

y w

eave

toge

ther

our

bus

ines

ses

with

a

goal

of i

mpr

ovin

g ou

r cl

ient

s’ o

vera

ll ex

peri

ence

with

us.

Thro

ugho

ut th

e CI

B, m

any

initi

ativ

es a

re u

nder

way

to

prov

ide

addi

tiona

l edu

catio

n an

d tr

aini

ng to

our

52,

000

empl

oyee

s. W

e ha

ve re

orga

nize

d ou

rsel

ves

to p

rom

ote

incr

ease

d fo

cus

on e

scal

atio

n of

issu

es to

enh

ance

our

cl

ient

s’ e

nd-t

o-en

d ex

peri

ence

, whi

le s

impl

ifyin

g ou

r bu

sine

ss m

odel

and

inve

stin

g in

tech

nolo

gy.

Coor

dina

ting

bet

ter

to s

uppo

rt c

lient

s

In B

anki

ng, w

hich

uni

tes

Corp

orat

e Ba

nker

s, T

reas

ury

Serv

ices

pro

fess

iona

ls a

nd In

vest

men

t Ban

kers

und

er

one

umbr

ella

, clie

nts

are

bene

fitin

g fr

om c

lose

r co

nnec

-tio

ns b

etw

een

the

prof

essi

onal

s w

ho a

re in

dai

ly c

onta

ct

with

them

and

our

Inve

stm

ent B

anke

rs w

ho s

peci

aliz

e in

str

ateg

ic a

dvis

ory

serv

ices

and

cap

ital r

aisi

ng.

Impr

ovin

g th

e co

ordi

natio

n am

ong

thes

e te

ams

help

s us

gai

n a

mor

e ho

listic

vie

w o

f our

clie

nts’

nee

ds a

nd

chal

leng

es a

nd th

en d

raw

upo

n ou

r m

any

prod

ucts

an

d se

rvic

es to

cre

ate

the

righ

t sol

utio

ns fo

r th

em. F

or

exam

ple,

we

are

prov

idin

g on

e m

ultin

atio

nal i

ndus

tria

l co

mpa

ny w

ith fi

nanc

ing

prod

ucts

and

ser

vice

s fr

om 14

di

ffere

nt g

roup

s in

sup

port

of i

ts b

usin

ess

activ

ities

in

29 c

ount

ries

aro

und

the

wor

ld.

To h

elp

impr

ove

the

expe

rien

ce o

f our

larg

e in

stitu

tiona

l in

vest

or c

lient

s, w

e ha

ve re

orga

nize

d th

e w

ay o

ur te

ams

wor

k to

geth

er to

fost

er g

reat

er c

ontin

uity

and

acc

ount

-ab

ility

— fr

om s

ales

to o

nboa

rdin

g, to

clie

nt s

ervi

ce, t

o op

erat

ions

and

tech

nolo

gy. R

educ

ing

silo

s, in

crea

sing

ac

coun

tabi

lity

and

impr

ovin

g in

form

atio

n flo

w a

cros

s te

ams

are

resu

lting

in fe

wer

err

ors,

gre

ater

effi

cien

cy

and

mor

e po

sitiv

e cl

ient

inte

ract

ions

.

Bett

er c

oord

inat

ion

amon

g ou

r te

ams

this

yea

r he

lped

us

pro

vide

a p

rim

e cu

stod

y so

lutio

n fo

r a

larg

e al

ter-

nativ

es fu

nd r

un b

y a

glob

al a

sset

man

ager

. Wor

king

in

clos

e pa

rtne

rshi

p, th

e te

am s

ucce

ssfu

lly m

igra

ted

the

fund

to o

ur p

latfo

rm w

ith m

inim

al d

isru

ptio

n de

spite

the

com

plex

ity o

f the

fund

’s pr

oduc

t sui

te a

nd th

e m

ultip

le

func

tions

and

regi

ons

invo

lved

.

COR

POR

ATE

& I

NV

ESTM

ENT

BAN

KH

OW

WE

DO

BU

SIN

ESS

— O

UR

CU

STO

MER

CO

MM

ITM

ENT

66 Stre

ngth

enin

g ou

r cl

ient

-cen

tere

d cu

ltur

e

Clie

nts

alw

ays

have

bee

n at

the

cent

er o

f our

bus

ines

s,

and

rein

forc

ing

a st

rong

, clie

nt-c

ente

red

cultu

re is

a

top

prio

rity

for

us. I

dent

ifyin

g is

sues

ear

ly a

nd a

ppro

-pr

iate

ly e

scal

atin

g co

ncer

ns k

eep

smal

ler

prob

lem

s fr

om b

ecom

ing

big

ones

and

als

o re

sults

in b

ette

r cl

ient

ser

vice

.

As m

entio

ned

on p

age

33, a

s pa

rt o

f our

effo

rt to

ens

ure

a ro

bust

dia

logu

e w

ith e

mpl

oyee

s an

d m

ake

sure

they

un

ders

tand

the

lett

er a

nd s

piri

t of w

hat i

s ex

pect

ed

of th

em, t

he le

ader

ship

of L

egal

, Sal

es a

nd T

radi

ng

deve

lope

d a

prog

ram

this

yea

r to

pro

mot

e en

hanc

ed

info

rmat

ion

shar

ing

and

trad

ing

prac

tices

for

Sale

s an

d Tr

adin

g pe

rson

nel.

This

man

dato

ry p

rogr

am p

rovi

ded

spec

ific

guid

elin

es a

roun

d ge

nera

l inf

orm

atio

n flo

w,

trad

ing

info

rmat

ion

and

chat

s, a

s w

ell a

s in

crea

sed

awar

enes

s ar

ound

pot

entia

l are

as o

f con

cern

.

Furt

herm

ore,

we

have

exp

ande

d a

Cultu

re a

nd C

ondu

ct

prog

ram

to in

clud

e al

l of o

ur C

IB b

usin

esse

s gl

obal

ly.

This

effo

rt in

volv

es a

n as

sess

men

t of c

ondu

ct r

isks

, m

itiga

tion

plan

s ac

ross

thos

e ri

sks,

met

rics

and

trai

ning

. Se

nior

lead

ers

in e

ach

line

of b

usin

ess

have

hos

ted

focu

s gr

oups

abo

ut o

ur c

ultu

re, i

nclu

ding

wha

t we

do

wel

l and

wha

t we

can

impr

ove,

as

wel

l as

cont

rols

and

ke

y dr

iver

s of

beh

avio

r. Im

port

antly

, we

incl

uded

mor

e ju

nior

em

ploy

ees

in th

is p

rogr

am to

bri

dge

the

gap

that

ca

n ex

ist b

etw

een

seni

or a

nd ju

nior

team

mem

bers

.

Confl

icts

man

agem

ent i

s a

corn

erst

one

of o

ur c

lient

- ce

nter

ed a

ppro

ach

to b

usin

ess,

and

we

cons

ider

it p

art

of e

very

one’

s jo

b to

hel

p id

entif

y an

d m

itiga

te p

oten

tial

confl

icts

of i

nter

est.

We

star

t with

robu

st p

olic

ies

and

proc

edur

es, w

hich

we

adap

t ove

r tim

e to

add

ress

de

velo

pmen

ts a

s ou

r bu

sine

sses

gro

w a

nd e

volv

e.

Beca

use

confl

icts

diff

er c

onsi

dera

bly

acro

ss th

e lin

es

of b

usin

esse

s, m

ultip

le c

ompl

emen

tary

con

trol

gro

ups,

in

clud

ing

our

Confl

icts

Offi

ce, L

egal

and

Com

plia

nce,

as

wel

l as

Ove

rsig

ht &

Con

trol

, wor

k cl

osel

y w

ith o

ur

busi

ness

exe

cutiv

es to

iden

tify

and

man

age

the

confl

icts

th

at a

rise

, bot

h re

al a

nd p

erce

ived

.

rais

ed o

n be

half

of s

tate

s, lo

cal g

over

nmen

ts, s

choo

l

dist

rict

s an

d no

npro

fits

, pro

vidi

ng th

em w

ith

nece

ssar

y

fund

s to

bui

ld s

choo

ls, r

oads

and

col

lege

faci

litie

s an

d

to s

uppo

rt o

ther

infr

astr

uctu

re p

roje

cts.

COR

POR

ATE

& I

NV

ESTM

ENT

BAN

K

HO

W W

E D

O B

USI

NES

S —

OU

R C

UST

OM

ER C

OM

MIT

MEN

T67

Stre

amlin

ing

wit

h te

chno

logy

Tech

nolo

gy is

the

back

bone

of o

ur b

usin

ess,

and

in th

e la

st fi

ve y

ears

, our

com

pany

has

spe

nt ro

ughl

y 8%

-9%

of

tota

l rev

enue

on

impr

ovin

g ou

r ca

pabi

litie

s. In

the

CIB,

the

inve

stm

ents

we

are

mak

ing

are

desi

gned

not

on

ly to

impr

ove

our

secu

rity

, per

form

ance

and

effi

cien

cy

but t

o m

ake

it ea

sier

for

clie

nts

to d

o bu

sine

ss w

ith u

s.

As p

art o

f our

effo

rt to

cre

ate

a m

ore

mod

ular

bus

ines

s an

d te

chno

logy

arc

hite

ctur

e, w

e ha

ve im

plem

ente

d fr

ont-

to-b

ack

arch

itect

ure

and

oper

atin

g m

odel

revi

ews

acro

ss s

elec

t bus

ines

ses

to im

prov

e cl

ient

ser

vice

, op

timiz

e pr

oces

s flo

ws,

inte

grat

e in

fras

truc

ture

and

si

mpl

ify h

ow w

e op

erat

e. T

his

year

alo

ne, w

e ar

e on

tr

ack

to d

ecom

mis

sion

mor

e th

an 2

00 d

iffer

ent a

pplic

a-tio

ns a

nd o

ver

5,00

0 se

rver

s.

Thes

e in

vest

men

ts a

lso

are

crea

ting

tang

ible

ben

efits

for

clie

nts.

In e

arly

201

3, o

ur M

arke

ts &

Inve

stor

Ser

vice

s bu

sine

sses

rolle

d ou

t our

new

clie

nt-f

acin

g pl

atfo

rm,

J.P. M

orga

n M

arke

ts. S

ince

then

, we

have

con

solid

ated

ne

arly

50

diffe

rent

app

licat

ions

, inc

ludi

ng re

sear

ch,

pre-

trad

e an

alyt

ics,

trad

e ex

ecut

ion,

trad

e st

atus

and

lim

its, p

ortfo

lio re

port

ing

and

mar

gins

, and

col

late

ral

man

agem

ent f

unct

ions

on

the

new

pla

tform

. Mor

e th

an 1

00,0

00 in

stitu

tiona

l clie

nt u

sers

now

are

usi

ng

this

enh

ance

d pl

atfo

rm, r

educ

ing

the

need

for

mul

tiple

lo

g-in

s an

d be

nefit

ing

from

a m

ore

cons

iste

nt e

xper

i-en

ce a

cros

s di

ffere

nt b

usin

esse

s an

d fu

nctio

ns.

In a

dditi

on, w

e ha

ve p

lace

d a

prio

rity

on

the

cont

rols

ar

ound

our

ele

ctro

nic

trad

ing

tech

nolo

gy, r

esul

ting

in a

re

view

of h

igh-

prio

rity

con

trol

s an

d im

plem

enta

tion

of

addi

tiona

l pro

tect

ions

.

Sim

plif

ying

bus

ines

ses

and

incr

easi

ng

tran

spar

ency

With

in th

e CI

B, w

e ha

ve ta

ken

a m

ulti-

face

ted

appr

oach

to

sim

plify

ing

our b

usin

ess

and

incr

easi

ng tr

ansp

aren

cy

to h

elp

clie

nts

bett

er u

nder

stan

d w

hat w

e do

and

mak

e m

ore

info

rmed

dec

isio

ns. I

n so

me

case

s, w

e ha

ve s

trea

m-

lined

, rat

iona

lized

or e

xite

d bu

sine

sses

in o

rder

to fo

cus

on th

e co

re a

ctiv

ities

that

are

mos

t im

port

ant t

o ou

r cl

ient

s. T

his

incl

udes

sca

ling

back

rela

tions

hips

and

tigh

t-en

ing

cont

rols

in c

orre

spon

dent

ban

king

, exi

ting

muc

h of

ou

r phy

sica

l com

mod

ities

bus

ines

s an

d se

lling

the

Glob

al

Spec

ial O

ppor

tuni

ties

Grou

p po

rtfo

lio (o

ur d

edic

ated

pr

inci

pal i

nves

tmen

t arm

). At

the

sam

e tim

e, w

e ar

e in

vest

ing

in te

chno

logy

and

infr

astr

uctu

re in

sup

port

of

core

bus

ines

ses

like

prim

e br

oker

age,

cus

tody

, and

ele

c-tr

onic

trad

ing

for e

quiti

es a

nd fi

xed

inco

me.

At a

mor

e gr

anul

ar le

vel,

we

have

take

n a

num

ber

of s

teps

to h

elp

our

clie

nts

bett

er u

nder

stan

d th

e st

ruct

ure,

pri

cing

and

beh

avio

r of

diff

eren

t pro

duct

s.

Spec

ifica

lly, f

or c

erta

in s

truc

ture

d pr

oduc

ts, w

e ha

ve

impl

emen

ted

mor

e st

ring

ent q

ualit

y st

anda

rds

and

have

upg

rade

d ou

r m

odel

s an

d an

alyt

ics

to im

prov

e ou

r cl

ient

s’ a

bilit

y to

und

erst

and

how

thes

e in

stru

-m

ents

per

form

und

er d

iffer

ent c

ondi

tions

. We

also

hav

e en

hanc

ed th

e co

nsis

tenc

y an

d tr

ansp

aren

cy o

f dis

clo-

sure

aro

und

the

pric

ing

of c

erta

in s

truc

ture

d pr

oduc

ts

and

incr

ease

d tr

ansp

aren

cy o

f quo

tatio

ns fo

r va

riou

s ov

er-t

he-c

ount

er d

eriv

ativ

es, e

nabl

ing

clie

nts

to m

ake

mor

e in

form

ed d

ecis

ions

.

Our

top

prio

rity

with

in th

e CI

B re

mai

ns h

elpi

ng o

ur

clie

nts

achi

eve

thei

r ob

ject

ives

by

prov

idin

g th

e be

st

poss

ible

adv

ice

and

prod

ucts

. With

the

cont

inue

d en

ergy

an

d co

mm

itmen

t of o

ur e

mpl

oyee

s, w

e co

ntin

ually

str

ive

to e

arn

our

clie

nts’

bus

ines

s an

d se

t new

sta

ndar

ds fo

r th

eir s

ucce

ss.

COR

POR

ATE

& I

NV

ESTM

ENT

BAN

KH

OW

WE

DO

BU

SIN

ESS

— O

UR

CU

STO

MER

CO

MM

ITM

ENT

68 COM

MER

CIA

L B

AN

KIN

G

Like

all

of o

ur b

usin

esse

s, C

omm

erci

al B

anki

ng is

co

ntin

ually

ask

ing

how

we

can

be b

ette

r an

d ho

w w

e

rew

ardi

ng fo

r ou

r cl

ient

s. T

his

help

s us

mai

ntai

n a

long

-ter

m r

elat

ions

hip

with

our

clie

nts.

A n

umbe

r of

ke

y im

prov

emen

ts w

e ha

ve m

ade

over

the

past

yea

rs

are

help

ing

us d

rive

tow

ard

thes

e go

als.

Part

ners

hip

driv

es m

ore

com

preh

ensi

ve

clie

nt s

olut

ions

Com

mer

cial

Ban

king

’s m

any

natu

ral t

ouch

poi

nts

with

th

e co

mpa

ny’s

othe

r lin

es o

f bus

ines

s en

able

us

to

wor

k to

geth

er a

cros

s bu

sine

sses

are

esp

ecia

lly e

vide

nt

whe

n lo

okin

g at

the

leve

l of b

usin

ess

part

ners

hip

and

volu

me

of c

lient

s th

at e

ngag

e w

ith m

ultip

le b

usin

esse

s:

last

yea

r Co

mm

erci

al B

anki

ng p

artic

ipat

ed in

833

fin

anci

ng tr

ansa

ctio

ns, i

nclu

ding

31

initi

al p

ublic

acqu

isiti

on tr

ansa

ctio

ns.

Trea

sury

Ser

vice

s pr

oduc

ts to

hel

p m

anag

e th

eir

busi

ness

mor

e effi

cien

tly.

near

ly 1

8 m

illio

n tim

es la

st y

ear.

Incr

easi

ngly

, clie

nts

use

our

com

mer

cial

car

ds a

nd m

erch

ant p

roce

ssin

g se

rvic

e, a

nd w

e se

e an

opp

ortu

nity

to b

ring

spe

cial

-iz

ed p

aym

ents

sol

utio

ns to

eve

n m

ore

clie

nts.

Prov

idin

g cu

stom

ized

sol

utio

ns th

roug

h de

dica

ted,

loca

l exp

erts

Duri

ng th

e la

st s

ever

al y

ears

, we

have

incr

ease

d ou

r fo

cus

on fi

ndin

g th

e ri

ght s

olut

ions

for

clie

nts

by u

sing

ou

r br

oad-

base

d pr

oduc

t set

. Whe

ther

our

clie

nts

need

to

rais

e ca

pita

l, pu

rcha

se n

ew e

quip

men

t or

open

a li

ne

of c

redi

t to

man

age

day-

to-d

ay o

pera

tions

, we

have

the

reso

urce

s to

hel

p:

who

spe

cial

ize

in in

vest

men

t ban

king

, ass

et-b

ased

le

ndin

g, s

yndi

cate

d fin

ance

, equ

ipm

ent fi

nanc

e,

trea

sury

ser

vice

s, e

nter

pris

e va

lue/

cash

flow

lend

ing

and

Empl

oyee

Sto

ck O

wne

rshi

p Pl

an tr

ansa

ctio

ns.

They

par

tner

with

our

loca

l ban

kers

to b

ring

cus

tom

-iz

ed, c

ompr

ehen

sive

and

app

ropr

iate

sol

utio

ns to

th

e m

arke

tpla

ce.

Com

mer

cial

Ban

king

so

clie

nts

can

bene

fit fr

om th

e

cont

inui

ng to

rec

eive

loca

l del

iver

y an

d se

rvic

e.

Thes

e gr

oups

incl

ude

tech

nolo

gy, o

il an

d ga

s,

food

and

bev

erag

e, a

nd m

edia

and

ent

erta

inm

ent,

amon

g ot

hers

.

bank

ers

and

cred

it an

d tr

easu

ry p

rofe

ssio

nals

to

prov

ide

mor

e lo

cal d

eliv

ery.

Sin

ce 2

006,

we

have

su

cces

sful

ly e

nter

ed 1

6 m

ajor

new

mar

kets

acr

oss

the

coun

try.

COM

MER

CIA

L BA

NKI

NG

Inte

rnat

iona

l Ser

vice

HO

W W

E D

O B

USI

NES

S —

OU

R C

UST

OM

ER C

OM

MIT

MEN

T69

List

enin

g to

our

clie

nts’

feed

back

We

regu

larl

y su

rvey

our

Com

mer

cial

Ban

king

clie

nts

to g

ive

them

an

oppo

rtun

ity to

pro

vide

feed

back

on

wha

t we

are

doin

g w

ell a

nd w

here

we

can

impr

ove.

Ar

eas

cove

red

incl

ude

our

cove

rage

mod

el, e

xper

tise,

pr

oduc

ts, c

lient

ser

vice

and

impl

emen

tatio

ns. T

he

resu

lts a

re s

hare

d di

rect

ly w

ith s

enio

r m

anag

ers

who

use

the

feed

back

to m

ake

chan

ges

to im

prov

e th

e ov

eral

l clie

nt e

xper

ienc

e. W

e re

cent

ly m

ade

the

follo

win

g ch

ange

s ba

sed

on c

lient

feed

back

:

info

rmat

ion

on th

e st

atus

of w

ire tr

ansf

ers

acce

ss to

mon

itor

syst

em p

erfo

rman

ce, i

nclu

ding

pl

anne

d sy

stem

out

ages

that

we

are

trea

ting

clie

nts

the

righ

t way

and

with

pr

ofes

sion

alis

m. A

s a

resu

lt, w

e ha

ve s

een

sign

ifica

nt

impr

ovem

ents

in o

ur c

lient

sat

isfa

ctio

n sc

ores

dur

ing

the

last

two

year

s

Impr

ovin

g th

e cl

ient

exp

erie

nce

thro

ugh

tech

nolo

gy a

nd tr

aini

ng

We

have

add

ed m

ore

than

1,5

00 e

mpl

oyee

s ac

ross

th

e bu

sine

ss o

ver

the

past

thre

e ye

ars

and

inve

sted

hu

ndre

ds o

f mill

ions

of d

olla

rs in

tech

nolo

gy to

impr

ove

our

clie

nts’

exp

erie

nce.

We

also

hav

e cr

eate

d ne

w

supp

ort t

eam

s to

allo

w b

anke

rs a

nd c

lient

ser

vice

pr

ofes

sion

als

to s

pend

mor

e di

rect

tim

e w

ith c

lient

s. F

or

exam

ple,

ove

r th

e pa

st s

ever

al y

ears

, we

have

:

expe

rien

ce w

hen

impl

emen

ting

a ne

w p

rodu

ct o

r se

rvic

e

proc

essi

ng, u

nder

wri

ting,

clo

sing

and

doc

umen

tatio

n sy

stem

that

sup

port

s ou

r in

dust

ry-le

adin

g m

ulti-

fam

ily le

ndin

g bu

sine

ss

-m

enta

tion

we

ask

of o

ur c

lient

s th

at h

ave

rela

tion-

ship

s w

ith m

ultip

le li

nes

of b

usin

ess

com

mun

icat

ions

mat

eria

ls to

be

clea

rer

and

sim

pler

supp

ort o

ur c

lient

s’ c

ompl

ex im

plem

enta

tions

our

onbo

ardi

ng p

roce

ss, e

spec

ially

giv

en th

e si

gnifi

-ca

nt in

crea

se in

requ

ired

due

dilig

ence

to im

prov

e ou

r em

ploy

ees’

aw

aren

ess

and

unde

r-st

andi

ng o

f the

ris

k an

d co

ntro

l env

ironm

ent,

as w

ell

as th

e im

port

ance

of p

rote

ctin

g cl

ient

info

rmat

ion

COM

MER

CIA

L BA

NKI

NG

HO

W W

E D

O B

USI

NES

S —

OU

R C

UST

OM

ER C

OM

MIT

MEN

T70 A

SSET

MA

NA

GEM

ENT

Man

agin

g m

oney

for

clie

nts

is th

e co

re o

f the

Ass

et

Man

agem

ent b

usin

ess.

In a

dditi

on to

del

iver

ing

stro

ng in

vest

men

t per

form

ance

, we

reco

gniz

e th

at

effec

tive

mon

ey m

anag

emen

t req

uire

s a

focu

s on

clie

nt

educ

atio

n, a

s w

ell a

s sp

ecia

lized

exp

ertis

e an

d so

lutio

ns

in th

e ar

eas

that

are

mos

t im

port

ant t

o ou

r cl

ient

s.

Educ

atin

g cl

ient

s an

d sh

arin

g ou

r in

sigh

ts

A ke

y pa

rt o

f our

adv

isor

s’ jo

bs is

kee

ping

clie

nts

wel

l-inf

orm

ed —

whe

ther

they

are

indi

vidu

als,

inst

itu-

tions

or

finan

cial

adv

isor

s. O

ur a

dvis

ors

star

t eac

h w

eek

with

a M

onda

y m

orni

ng m

eetin

g to

dis

cuss

wor

ldw

ide

even

ts in

mar

kets

, eco

nom

ies

and

gove

rnm

ents

and

the

resu

lting

impl

icat

ions

for

clie

nts

and

thei

r po

rtfo

lios.

One

of A

sset

Man

agem

ent’s

lead

ing

educ

atio

nal p

ubli-

catio

ns is

Eye

on

the

Mar

ket,

whi

ch fe

atur

es in

sigh

ts

and

com

men

tary

from

Ass

et M

anag

emen

t’s C

hair

man

of

Mar

ket &

Inve

stm

ent S

trat

egy

on n

ews

and

tren

ds

shap

ing

the

mar

kets

and

eco

nom

y. In

itial

ly c

reat

ed

for

priv

ate

clie

nts,

dur

ing

the

past

thre

e ye

ars

we

deve

lope

d a

vers

ion

cust

omiz

ed fo

r in

stitu

tiona

l clie

nts

as w

ell.

Toda

y, a

ppro

xim

atel

y 55

,000

clie

nts

and

pros

pect

ive

clie

nts

acro

ss o

ur In

vest

men

t and

Glo

bal

Wea

lth M

anag

emen

t bus

ines

ses

rece

ive

each

edi

tion

of

Eye

on th

e M

arke

t.

In a

dditi

on, w

e de

velo

ped

a M

arke

t Ins

ight

s pr

ogra

m

to k

eep

our

finan

cial

inte

rmed

iary

clie

nts

— a

nd th

eir

clie

nts

— in

form

ed a

bout

mar

ket d

evel

opm

ents

(e.g

., th

roug

h th

e G

uide

to th

e M

arke

ts p

ublic

atio

n). W

e ha

ve

wor

ked

to ta

ilor

our

insi

ghts

to d

iffer

ent r

egio

ns a

nd

clie

nt s

egm

ents

, with

the

goal

of h

elpi

ng a

ll ou

r cl

ient

s be

tter

und

erst

and

mar

kets

and

inve

stin

g —

opp

ortu

ni-

ties

and

risk

s —

in o

rder

to h

elp

clie

nts

achi

eve

the

best

po

ssib

le o

utco

mes

.

The

prog

ram

’s G

uide

to th

e M

arke

ts p

ublic

atio

n, w

hich

be

gan

in th

e U

nite

d St

ates

a d

ecad

e ag

o an

d w

as

issu

ed q

uart

erly

, exp

ande

d ov

er th

e la

st tw

o ye

ars

to A

sia,

Eur

ope

and

Latin

Am

eric

a an

d no

w is

bei

ng

upda

ted

mon

thly

.

Plan

ning

for

impo

rtan

t life

eve

nts

One

of t

he p

rim

ary

life

even

ts in

vest

ors

save

for

is

retir

emen

t. In

fact

, ret

irem

ent i

s th

e #1

sav

ings

and

in

vest

ing

goal

of A

mer

ican

s. In

Ass

et M

anag

emen

t, w

e ar

e de

dica

ted

to p

artn

erin

g w

ith p

lan

spon

sors

, ad

viso

rs a

nd in

divi

dual

s to

hel

p th

em fo

cus

on

impr

ovin

g re

tirem

ent o

utco

mes

. To

this

end

, we

leve

rage

the

best

thin

king

acr

oss

the

com

pany

to

info

rm th

e de

velo

pmen

t of i

nsig

hts,

sol

utio

ns a

nd to

ols

that

we

shar

e w

ith c

lient

s:

80

% o

f all

our

asse

ts w

ere

in th

e fi

rst o

r se

cond

ASS

ET M

AN

AGEM

ENT

HO

W W

E D

O B

USI

NES

S —

OU

R C

UST

OM

ER C

OM

MIT

MEN

T71

Gui

de to

Ret

irem

ent i

s an

edu

catio

nal p

rogr

am

crea

ted

in 2

009

to h

elp

finan

cial

adv

isor

s si

mpl

ify

the

retir

emen

t pla

nnin

g co

nver

satio

ns th

ey h

ave

with

clie

nts.

It fo

cuse

s on

thre

e ke

y re

tirem

ent

plan

ning

topi

cs —

sav

ing,

spe

ndin

g an

d in

vest

ing

—

with

con

cept

s ill

ustr

ated

by

colo

rful

, eas

y-to

- un

ders

tand

cha

rts

and

grap

hs. T

his

year

, we

di

stri

bute

d ov

er 5

0,00

0 pr

inte

d bo

oks

thro

ugh

m

ore

than

12,

000

finan

cial

adv

isor

s. W

e co

ntin

u-al

ly h

ave

enha

nced

the

prog

ram

ove

r th

e ye

ars,

de

epen

ing

cont

ent,

deve

lopi

ng d

iscu

ssio

n gu

ides

for

advi

sors

to u

se w

ith c

lient

s, c

reat

ing

a di

gita

l int

er-

activ

e ve

rsio

n, a

ddin

g qu

arte

rly

clie

nt w

ebca

sts

and,

m

ore

rece

ntly

, offe

ring

an

iPad

app

ver

sion

.

deve

lope

d a

glid

e pa

th in

corp

orat

ing

exte

nsiv

e re

sear

ch fr

om a

ctua

l par

ticip

ant b

ehav

ior.

One

of

our m

ajor

initi

ativ

es la

st y

ear f

ocus

ed o

n he

lpin

g th

e m

arke

tpla

ce b

ette

r und

erst

and

the

role

of t

arge

t dat

e fu

nds

with

in re

tirem

ent p

lans

and

how

we

man

age

risk

alon

g th

e ta

rget

dat

e gl

ide

path

. In

addi

tion,

we

have

take

n th

is m

odel

ove

rsea

s an

d ex

pand

ed in

to th

e Un

ited

King

dom

to m

eet c

lient

dem

and.

use

a st

anda

rdiz

ed, s

yste

mat

ic p

roce

ss fo

r ev

alu-

atin

g an

d se

lect

ing

targ

et d

ate

fund

s fo

r a

retir

e-m

ent p

lan’

s in

vest

men

t lin

eup.

Sin

ce it

s la

unch

in

2009

, the

tool

has

bee

n us

ed b

y pl

an s

pons

ors

and

finan

cial

adv

isor

s to

mak

e in

form

ed in

vest

men

t de

cisi

ons

and

help

sat

isfy

thei

r fid

ucia

ry re

spon

si-

bilit

ies.

Ear

lier

this

yea

r, w

e la

unch

ed v

ersi

on 2

.0,

feat

urin

g en

hanc

ed fu

nctio

nalit

y an

d an

alyt

ics

and

enab

ling

thou

sand

s of

our

clie

nts

to g

ener

ate

mor

e th

an 5

,500

repo

rts.

Exte

ndin

g cr

edit

to s

uppo

rt c

lient

s

We

reco

gniz

e th

at, f

or m

any

clie

nts,

lend

ing

solu

tions

ar

e ju

st a

s im

port

ant a

s in

vest

men

t ide

as. C

redi

t can

he

lp a

fam

ily p

urch

ase

a ne

w h

ome

or a

n en

trep

rene

ur

inve

st in

a b

usin

ess

vent

ure,

whi

ch, i

n tu

rn, s

uppo

rts

the

loca

l eco

nom

y. O

ver t

he p

ast s

ever

al y

ears

, Ass

et

Man

agem

ent’s

Glo

bal W

ealth

Man

agem

ent b

usin

ess

has

rene

wed

its

focu

s on

adv

isin

g cl

ient

s on

bot

h si

des

of

thei

r bal

ance

she

ets

to p

rovi

de m

ore

com

plet

e so

lutio

ns:

sit s

ide

by s

ide

with

our

ban

kers

and

inve

stor

s to

ad

vise

clie

nts

on u

sing

cre

dit e

ffect

ivel

y. A

dvic

e ha

s ev

olve

d to

incl

ude

area

s of

par

ticul

ar im

port

ance

in

a lo

w-r

ate

envi

ronm

ent,

such

as

miti

gatin

g in

tere

st

rate

ris

k an

d ri

ght-

sizi

ng le

vera

ge u

se.

time

it ta

kes

to g

o fr

om c

ompl

etin

g an

app

licat

ion

to b

eing

cle

ared

to c

lose

by

15%

(thr

ough

Oct

ober

20

14).

We

also

hav

e ex

pand

ed o

ur m

enu

of in

vest

-m

ent p

rope

rty

mor

tgag

e off

erin

gs to

all

amor

tizin

g pr

oduc

ts, m

ade

them

ava

ilabl

e in

all

U.S

. sta

tes

and

sim

plifi

ed th

eir

pric

ing

stru

ctur

e.

to s

peci

fic m

arke

t dem

ands

, inc

ludi

ng le

ndin

g on

shor

e in

Bra

zil a

nd in

the

Asia

and

U.K

. hig

h-

net-

wor

th s

egm

ents

.

the

intr

oduc

tion

of a

Glo

bal L

endi

ng V

alue

Eng

ine

that

use

s m

arke

t dat

a to

gen

erat

e le

ndin

g va

lues

fo

r eq

uity

, fixe

d in

com

e, m

utua

l fun

ds a

nd s

truc

-tu

red

prod

ucts

.

ASS

ET M

AN

AGEM

ENT

HO

W W

E D

O B

USI

NES

S —

OU

R C

UST

OM

ER C

OM

MIT

MEN

T72 St

reng

then

ing

the

fiduc

iary

fram

ewor

k

In A

sset

Man

agem

ent,

we

act a

s a

fiduc

iary

in a

num

ber

of w

ays:

as

a tr

uste

e fo

r in

divi

dual

s an

d fa

mili

es, a

s a

disc

retio

nary

inve

stm

ent a

dvis

or fo

r in

divi

dual

s, a

s an

in

vest

men

t adv

isor

to m

utua

l fun

ds a

nd a

s a

trus

tee

of c

omm

ingl

ed fu

nds.

Tha

t com

es w

ith a

resp

onsi

bilit

y to

trea

t clie

nts

fair

ly, m

anag

e co

nflic

ts o

f int

eres

t, ac

t pr

uden

tly a

nd p

rovi

de tr

ansp

aren

cy in

our

dis

clos

ures

.

To s

hare

a fe

w e

xam

ples

of h

ow w

e’ve

str

engt

hene

d ou

r co

mm

itmen

t to

thes

e re

spon

sibi

litie

s, w

e ha

ve:

our

trus

ts a

nd e

stat

es b

usin

ess,

who

hav

e sp

ecifi

c fid

ucia

ry e

xper

tise

and

expe

rien

ce

prov

ide

incr

ease

d ch

ecks

and

bal

ance

s

as a

ppro

pria

te

Give

n th

e fid

ucia

ry n

atur

e of

man

y of

its

busi

ness

es,

Asse

t Man

agem

ent h

as p

laye

d a

lead

role

in s

tren

gth-

enin

g th

e co

mpa

ny’s

fiduc

iary

fram

ewor

k. T

hese

effo

rts

incl

ude

broa

deni

ng th

e sc

ope

of h

ow w

e lo

ok a

t fidu

ciar

y ac

tiviti

es a

cros

s th

e co

mpa

ny a

nd e

stab

lishi

ng m

ore

cons

iste

nt g

over

nanc

e st

anda

rds

for o

ur b

usin

esse

s.

Spec

ifica

lly, i

n De

cem

ber

2013

, the

com

pany

cre

ated

a

Firm

wid

e Fi

duci

ary

Risk

Com

mitt

ee th

at p

rovi

des

a fo

rum

for

disc

ussi

ng is

sues

, ris

ks a

nd d

evel

opm

ents

re

late

d to

fidu

ciar

y ac

tiviti

es. T

he c

omm

ittee

pro

vide

s a

foru

m fo

r ri

sk m

atte

rs re

late

d to

the

com

pany

’s fid

ucia

ry a

ctiv

ities

and

ove

rsee

s th

e fir

mw

ide

fiduc

iary

ri

sk g

over

nanc

e fr

amew

ork,

whi

ch s

uppo

rts

the

cons

is-

tent

iden

tifica

tion

and

esca

latio

n of

fidu

ciar

y ri

sk

mat

ters

by

the

rele

vant

line

s of

bus

ines

s or

cor

pora

te

func

tions

resp

onsi

ble

for

man

agin

g fid

ucia

ry a

ctiv

i-tie

s. T

he c

omm

ittee

esc

alat

es s

igni

fican

t iss

ues

to th

e Fi

rmw

ide

Risk

Com

mitt

ee, t

he B

oard

of D

irect

ors’

Ris

k Po

licy

Com

mitt

ee a

nd A

udit

Com

mitt

ee, a

nd a

ny o

ther

co

mm

ittee

con

side

red

appr

opri

ate.

ASS

ET M

AN

AGEM

ENT

V. O

UR

REL

ATIO

NSH

IPS

WIT

H R

EGU

LATO

RS,

SH

AR

EHO

LDER

S A

ND

CO

MM

UN

ITIE

S

HO

W W

E D

O B

USI

NES

S —

OU

R C

UST

OM

ER C

OM

MIT

MEN

T74

HO

W W

E D

O B

USI

NES

S —

OU

R R

ELAT

ION

SHIP

S W

ITH

REG

ULA

TOR

S, S

HA

REH

OLD

ERS

AN

D C

OM

MU

NIT

IES

75

The

serv

ice

we

prov

ide

our

cust

omer

s is

onl

y pa

rt o

f the

va

lue

our

com

pany

see

ks to

cre

ate.

As

a gl

obal

fina

ncia

l in

stitu

tion,

we

have

the

oppo

rtun

ity a

nd o

blig

atio

n to

co

ntri

bute

to a

wel

l-fun

ctio

ning

glo

bal fi

nanc

ial s

yste

m,

deliv

er a

fair

retu

rn to

our

sha

reho

lder

s, a

nd m

ake

a po

sitiv

e co

ntri

butio

n to

the

peop

le a

nd in

stitu

tions

that

ar

e aff

ecte

d by

our

bus

ines

ses.

Mak

ing

thes

e co

ntri

butio

ns re

quire

s de

ep a

nd s

usta

ined

en

gage

men

t with

man

y pa

rtie

s, p

artic

ular

ly o

ur re

gu-

lato

rs, s

hare

hold

ers

and

nonp

rofit

par

tner

s. O

ver

the

past

sev

eral

yea

rs, w

e ha

ve b

een

dilig

ently

wor

king

to

enh

ance

our

rela

tions

hips

with

thes

e pa

rtie

s. T

his

sect

ion

desc

ribe

s so

me

of th

e ac

tions

we

have

take

n.

REG

ULA

TOR

S

We

are

com

mitt

ed to

bei

ng tr

ansp

aren

t and

resp

on-

sive

in o

ur e

xten

sive

inte

ract

ions

with

our

regu

lato

rs.

That

mea

ns c

onsi

sten

tly p

rovi

ding

them

with

com

plet

e,

accu

rate

and

tim

ely

info

rmat

ion

and

mai

ntai

ning

an

open

, ong

oing

dia

logu

e.

We

seek

to a

chie

ve th

is g

oal i

n th

ree

way

s:

as d

emon

stra

ted

by o

ur c

ontr

ol a

gend

a

with

our

regu

lato

rs

-tio

ns w

ith re

gula

tors

acr

oss

the

ente

rpri

se

A re

gula

tory

min

dset

Satis

fyin

g th

e le

tter

and

spi

rit o

f the

law

requ

ires

that

w

e un

ders

tand

all

lega

l and

regu

lato

ry re

quire

men

ts

and

have

a c

ultu

re a

nd in

fras

truc

ture

that

em

phas

izes

co

mpl

ianc

e an

d is

sue

esca

latio

n an

d re

med

iatio

n. T

his

unde

rpin

s th

e eff

orts

des

crib

ed th

roug

hout

this

repo

rt

to ta

ke p

roac

tive

step

s to

mee

t or

exce

ed o

ur re

gula

-to

rs’ e

xpec

tatio

ns.

Our

line

s of

bus

ines

s ar

e th

e fir

st li

ne o

f def

ense

. By

mak

ing

effec

tive

cont

rols

an

inte

gral

par

t of o

ur ro

utin

e bu

sine

ss p

ract

ices

and

then

als

o ha

ving

effe

ctiv

e ch

ecks

an

d ba

lanc

es in

pla

ce, w

e ca

n ad

dres

s m

any

issu

es

befo

re th

ey b

ecom

e la

rger

pro

blem

s. W

e al

so c

an

enga

ge re

gula

tors

in c

onst

ruct

ive

dial

ogue

as

we

desi

gn

appr

opri

ate

adju

stm

ents

and

rem

edia

tion

plan

s.

Our

regu

lato

ry m

inds

et in

clud

es th

e fo

llow

ing

guid

ing

prin

cipl

es:

-en

cy w

ith o

ur re

gula

tors

to e

nabl

e us

to h

ave

the

prop

er d

ata

capa

bilit

ies

to

proa

ctiv

ely

iden

tify

prob

lem

s in

the

earl

y st

ages

REG

ULA

TOR

S

OU

R R

ELAT

ION

SHIP

S W

ITH

R

EGU

LATO

RS,

SH

AR

EHO

LDER

S A

ND

CO

MM

UN

ITIE

S

HO

W W

E D

O B

USI

NES

S —

OU

R R

ELAT

ION

SHIP

S W

ITH

REG

ULA

TOR

S, S

HA

REH

OLD

ERS

AN

D C

OM

MU

NIT

IES

76

proc

esse

s, p

olic

ies

and

proc

edur

es s

o th

at th

ey

resu

lt in

bus

ines

ses

that

fully

com

ply

with

the

spir

it an

d le

tter

of r

egul

ator

y re

quire

men

ts, i

n lin

e w

ith

our

own

and

our

regu

lato

rs’ e

xpec

tatio

ns

regu

lato

rs in

add

ress

ing

thes

e is

sues

com

plex

ity

that

com

plia

nce

with

our

regu

lato

rs’ r

eque

sts

and

requ

irem

ents

is o

ur p

rior

ity

The

Ope

ratin

g Co

mm

ittee

regu

larl

y re

info

rces

our

regu

-la

tory

min

dset

to o

ur e

mpl

oyee

s. A

rece

nt m

emo

to a

ll em

ploy

ees,

sig

ned

by e

very

mem

ber

of th

e O

pera

ting

Com

mitt

ee, s

et fo

rth

the

com

pany

‘s e

xpec

tatio

ns

arou

nd re

gula

tory

eng

agem

ent,

incl

udin

g th

e fo

llow

ing:

upon

eac

h of

us

to re

spon

d in

a ti

mel

y fa

shio

n an

d to

fo

llow

est

ablis

hed

prot

ocol

s.”

we

mus

t ens

ure

the

info

rmat

ion

we’

re p

rovi

ding

is

accu

rate

. Thi

s m

eans

che

ckin

g —

and

rech

ecki

ng —

re

port

s be

fore

sen

ding

. […

] If w

e ar

e un

clea

r ab

out

a re

ques

t, or

feel

ther

e m

ay b

e ad

ditio

nal o

r al

ter-

nativ

e in

form

atio

n w

hich

may

be

pert

inen

t to

wha

t th

e re

gula

tor

is a

skin

g fo

r, w

e sh

ould

eng

age

our

regu

lato

rs in

a d

iscu

ssio

n to

add

ress

[the

requ

est]

proa

ctiv

ely.

”

reso

urce

s to

bea

r on

sol

ving

them

, inc

ludi

ng

enga

ging

our

regu

lato

rs a

s ap

prop

riat

e.”

prob

lem

. [...

] And

if th

e pr

oble

m m

ight

be

an is

sue

in

anot

her

line

of b

usin

ess,

mak

e su

re th

e ri

ght p

eopl

e ar

e in

form

ed.”

Lead

ersh

ip e

ngag

emen

t

Our

sen

ior

lead

ers

com

mitt

ed a

n ev

en m

ore

sign

ifica

nt

amou

nt o

f the

ir ti

me

to m

eetin

g w

ith o

ur re

gula

tors

in

201

3 an

d 20

14. S

uch

freq

uent

inte

ract

ion

help

s us

he

ar fi

rsth

and

wha

t reg

ulat

ors

are

focu

sed

on a

nd g

ives

us

a fo

rum

for

keep

ing

them

wel

l-inf

orm

ed o

n w

hat i

s ha

ppen

ing

in o

ur b

usin

esse

s. W

e di

scus

s ke

y re

gula

tory

m

atte

rs a

nd b

usin

ess

upda

tes

in a

num

ber

of fo

rum

s:

Boar

d of

Dir

ecto

rs e

ngag

emen

t. O

ur p

rim

ary

U.S.

re

gula

tors

mee

t with

var

ious

Boa

rd c

omm

ittee

s,

regu

larl

y re

ceiv

e m

eetin

g m

ater

ials

and

min

utes

, an

d m

eet w

ith in

divi

dual

Boa

rd m

embe

rs to

di

scus

s re

gula

tors

’ exp

ecta

tions

on

effec

tive

Boar

d ov

ersi

ght.

Duri

ng 2

013-

2014

, our

inde

pend

ent B

oard

m

embe

rs m

et w

ith o

ur p

rim

ary

U.S.

regu

lato

rs, t

he

Boar

d of

Gov

erno

rs o

f the

Fed

eral

Res

erve

Sys

tem

(t

he F

eder

al R

eser

ve),

the

Offi

ce o

f the

Com

ptro

ller

of th

e Cu

rren

cy (O

CC) a

nd th

e Fe

dera

l Dep

osit

Insu

ranc

e Co

rpor

atio

n (F

DIC)

, as

wel

l as

the

U.S.

Se

curi

ties

and

Exch

ange

Com

mis

sion

(SEC

) and

th

e Co

nsum

er F

inan

cial

Pro

tect

ion

Bure

au (C

FPB)

. Ce

rtai

n Bo

ard

mem

bers

als

o m

et w

ith in

tern

atio

nal

regu

lato

rs, i

nclu

ding

the

Prud

entia

l Reg

ulat

ion

Auth

ority

(PRA

) and

the

Fina

ncia

l Con

duct

Aut

hori

ty

(FCA

) in

the

Unite

d Ki

ngdo

m; t

he F

eder

al F

inan

cial

Su

perv

isor

y Au

thor

ity in

Ger

man

y; th

e H

ong

Kong

M

onet

ary

Auth

ority

(HKM

A); t

he C

hina

Ban

king

Re

gula

tory

Com

mis

sion

in B

eijin

g; a

nd th

e M

onet

ary

Auth

ority

of S

inga

pore

(MAS

).

REG

ULA

TOR

S

HO

W W

E D

O B

USI

NES

S —

OU

R R

ELAT

ION

SHIP

S W

ITH

REG

ULA

TOR

S, S

HA

REH

OLD

ERS

AN

D C

OM

MU

NIT

IES

77

Chai

rman

and

CEO

eng

agem

ent.

Our

Cha

irm

an a

nd

CEO

hol

ds a

mon

thly

mee

ting

with

sen

ior

exam

iner

s fr

om th

e O

CC, t

he F

eder

al R

eser

ve a

nd th

e FD

IC a

nd

also

mee

ts fr

eque

ntly

with

the

CFPB

, am

ong

othe

rs.

In 2

013-

2014

, our

Cha

irm

an a

nd C

EO m

et w

ith

regu

lato

rs fr

om a

ll re

gion

s in

whi

ch th

e co

mpa

ny

oper

ates

, inc

ludi

ng A

sia

Paci

fic (A

PAC)

, Eur

ope,

M

iddl

e Ea

st a

nd A

fric

a (E

MEA

) and

Lat

in A

mer

ica

(Lat

Am).

Inte

rnat

iona

l reg

ulat

ory

mee

tings

hav

e oc

curr

ed re

gula

rly

sinc

e 20

13, i

nclu

ding

mee

tings

w

ith re

pres

enta

tives

from

the

PRA

and

FCA,

HKM

A,

Euro

pean

Com

mis

sion

, Fre

nch

Trea

sury

, Jap

anes

e M

inis

try

of F

inan

ce a

nd A

ustr

alia

n Tr

easu

ry.

Seni

or m

anag

emen

t eng

agem

ent.

Fro

m th

e be

ginn

ing

of 2

013

thro

ugh

the

thir

d qu

arte

r of

201

4,

mem

bers

of o

ur O

pera

ting

Com

mitt

ee a

nd th

eir

dire

ct re

port

s ha

ve h

ad m

ore

than

1,3

00 m

eetin

gs

with

regu

lato

rs. O

ur li

ne o

f bus

ines

s CE

Os,

Chi

ef

Adm

inis

trat

ive

Offi

cer,

Chie

f Fin

anci

al O

ffice

r, Ch

ief

Risk

Offi

cer

and

Gene

ral C

ouns

el m

eet w

ith d

omes

tic

and

inte

rnat

iona

l reg

ulat

ors,

suc

h as

the

OCC

, Fe

dera

l Res

erve

, FDI

C, P

RA, C

FPB

and

SEC

(am

ong

othe

rs),

ofte

n in

sta

ndin

g m

onth

ly, q

uart

erly

or s

emi-

annu

al m

eetin

gs. F

or e

xam

ple,

our

Chi

ef O

pera

ting

Offi

cer

mee

ts w

ith re

gula

tors

from

the

OCC

, Fed

eral

Re

serv

e an

d FD

IC m

onth

ly to

ens

ure

that

they

hav

e ac

cess

to th

e in

form

atio

n th

ey n

eed.

In a

dditi

on,

in 2

013-

2014

, our

Chi

ef O

pera

ting

Offi

cer

met

with

re

gula

tors

from

the

APAC

, EM

EA a

nd L

atAm

regi

ons.

In

tern

atio

nal r

egul

ator

y m

eetin

gs o

ccur

regu

larl

y am

ong

seni

or m

anag

emen

t, in

clud

ing

mee

tings

with

re

pres

enta

tives

from

the

Japa

nese

Fin

anci

al S

ervi

ces

Agen

cy, H

KMA,

MAS

, PRA

and

U.K

. Tre

asur

y.

Enha

nced

com

mun

icat

ions

Acro

ss th

e en

terp

rise,

our

bus

ines

ses a

nd c

ontr

ol fu

nctio

ns

enga

ge w

ith o

ur re

gula

tors

in m

ultip

le w

ays:

thro

ugh

exam

s and

con

tinuo

us m

onito

ring,

regu

lar m

eetin

gs a

nd

ad h

oc re

ques

ts. W

e sh

are

regu

lar r

epor

ts w

ith re

gula

-to

rs, g

ive

them

acc

ess t

o ou

r sys

tem

s and

our

peo

ple,

and

pr

oact

ivel

y se

ek fe

edba

ck a

s to

whe

ther

or n

ot th

ey a

re

getti

ng th

e rig

ht le

vel a

nd fr

eque

ncy

of in

form

atio

n.

To p

ut th

e le

vel o

f eng

agem

ent w

ith o

ur re

gula

tors

in

cont

ext:

com

mod

ities

regu

lato

rs o

vers

eein

g ou

r bu

sine

ss

glob

ally

.

-vi

dual

exa

min

ers

from

our

pri

mar

y U.

S. re

gula

tors

.

glob

ally

in 2

013.

are

regu

larl

y pr

ovid

ed to

one

or

mor

e of

our

regu

la-

tors

aro

und

the

glob

e.

are

deliv

ered

to th

e O

CC a

nd th

e Fe

dera

l Res

erve

th

roug

h a

dedi

cate

d po

rtal

— in

clud

ing

the

key

repo

rts

we

use

to m

anag

e ou

r bu

sine

sses

.

regu

lato

rs a

roun

d th

e gl

obe.

As d

escr

ibed

abo

ve a

nd in

our

regu

lato

ry fi

lings

, in

rece

nt y

ears

the

com

pany

has

ent

ered

into

sev

eral

re

gula

tory

ord

ers

with

its

bank

ing

regu

lato

rs, a

Def

erre

d Pr

osec

utio

n Ag

reem

ent w

ith th

e U.

S. A

ttor

ney’

s Offi

ce

for t

he S

outh

ern

Dist

rict o

f New

Yor

k an

d se

ttle

men

ts

of e

nfor

cem

ent a

ctio

ns w

ith v

ario

us g

over

nmen

tal

agen

cies

. In

addi

tion,

ong

oing

regu

lato

ry e

xam

inat

ions

ha

ve re

sulte

d in

regu

lato

ry d

irect

ion

to a

ddre

ss is

sues

. W

e ar

e no

t onl

y ob

ligat

ed to

add

ress

suc

h is

sues

but

are

co

mm

itted

to d

oing

so.

The

act

ions

we

have

des

crib

ed in

th

is re

port

are

ste

ps in

that

pro

cess

.

REG

ULA

TOR

SH

OW

WE

DO

BU

SIN

ESS

— O

UR

REL

ATIO

NSH

IPS

WIT

H R

EGU

LATO

RS,

SH

AR

EHO

LDER

S A

ND

CO

MM

UN

ITIE

S78 SH

AR

EHO

LDER

S

Our

sha

reho

lder

s ar

e di

vers

e in

eve

ry re

spec

t — la

rge

and

smal

l; in

stitu

tions

and

indi

vidu

als;

act

ive

trad

ers

and

long

-ter

m h

olde

rs; s

tock

pic

kers

and

inde

xed

inve

stor

s; U

.S. a

nd in

tern

atio

nal.

Som

e of

our

sha

re-

hold

ers

inve

st w

ith a

focu

s on

soc

ial r

espo

nsib

ility

, whi

le

othe

rs a

re c

once

rned

sol

ely

with

inve

stm

ent r

etur

ns. A

s a

com

pany

, it i

s ou

r re

spon

sibi

lity

to a

dher

e to

our

cor

e pr

inci

ples

by

trea

ting

all o

ur s

hare

hold

ers

equa

lly a

nd

bala

ncin

g th

eir

dive

rse

inte

rest

s an

d ex

pect

atio

ns.

Tow

ard

that

end

, ove

r the

pas

t yea

rs, w

e ha

ve fo

cuse

d on

im

prov

ing

our e

ngag

emen

t with

our

sha

reho

lder

s on

a

num

ber o

f fro

nts:

enh

ance

d co

mm

unic

atio

ns, i

mpr

oved

re

spon

sive

ness

to s

hare

hold

er fe

edba

ck, c

lear

er d

iscl

o-su

re d

ocum

ents

and

incr

ease

d sh

areh

olde

r-di

rect

or

enga

gem

ent.

Lead

ersh

ip e

ngag

emen

t

In 2

014,

the

Boar

d en

dors

ed th

e Sh

areh

olde

r-Di

rect

or

Exch

ange

(SDX

) Pro

toco

l as

a gu

ide

for

effec

tive,

m

utua

lly b

enefi

cial

eng

agem

ent b

etw

een

shar

ehol

ders

an

d di

rect

ors.

The

SDX

Pro

toco

l was

cre

ated

by

a gr

oup

of le

adin

g in

depe

nden

t dire

ctor

s al

ong

with

repr

esen

ta-

tives

from

a n

umbe

r of

inst

itutio

nal i

nves

tors

.

Cent

ral t

o th

e SD

X Pr

otoc

ol is

the

belie

f tha

t all

part

ies

mus

t ent

er d

iscu

ssio

ns w

illin

g to

list

en a

nd to

take

ac

tion

in re

spon

se to

val

id c

once

rns

or e

xpla

in w

hy

no a

ctio

n is

bei

ng ta

ken.

The

SDX

Pro

toco

l foc

uses

on

long

-ter

m v

alue

cre

atio

n an

d is

inte

nded

to s

uppl

emen

t ex

istin

g In

vest

or R

elat

ions

effo

rts.

In a

dditi

on, a

fter

eac

h of

our

com

pany

’s qu

arte

rly

earn

ings

cal

ls, w

e pr

ovid

e in

vest

or fe

edba

ck to

the

Boar

d so

it is

aw

are

of to

pics

of p

artic

ular

inte

rest

to

the

com

pany

’s sh

areh

olde

rs, a

long

with

any

sha

reho

lder

re

com

men

datio

ns o

r re

ques

ts.

Enha

nced

com

mun

icat

ions

Enga

gem

ent a

nd tr

ansp

aren

cy w

ith o

ur s

hare

hold

ers

help

the

com

pany

gai

n us

eful

feed

back

to b

ette

r ta

ilor

the

publ

ic in

form

atio

n w

e pr

ovid

e to

add

ress

the

inte

rest

s an

d in

quir

ies

of o

ur s

hare

hold

ers.

We

inte

ract

and

com

mun

icat

e w

ith s

hare

hold

ers

thro

ugh

a nu

mbe

r of

foru

ms,

incl

udin

g ou

r qu

arte

rly

earn

ings

pre

sent

atio

ns, S

EC fi

lings

, Ann

ual R

epor

t and

pr

oxy

stat

emen

t, an

nual

mee

ting,

inve

stor

con

fer-

ence

s an

d w

eb c

omm

unic

atio

ns. I

n 20

13, w

e la

unch

ed

an e

xpan

ded

shar

ehol

der

outr

each

pro

gram

, with

the

goal

of c

over

ing

a w

ider

arr

ay o

f top

ics

with

a b

road

er

grou

p of

sha

reho

lder

s. W

e co

nduc

t a fo

rmal

sha

reho

lder

ou

trea

ch p

rogr

am tw

ice

a ye

ar, w

ith fa

ll m

eetin

gs

focu

sed

on c

orpo

rate

gov

erna

nce

and

spri

ng d

iscu

ssio

ns

focu

sed

on is

sues

rela

ted

to th

e pr

oxy

stat

emen

t. Af

ter

each

of t

hese

out

reac

h pr

ogra

ms,

we

prov

ide

inve

stor

fe

edba

ck to

the

Boar

d. O

ur re

cent

out

reac

h eff

orts

co

nsis

ted

of th

e fo

llow

ing:

mee

tings

and

cal

ls in

201

4, a

n in

crea

se o

f mor

e th

an

50%

from

201

2.

-m

atel

y 40

% o

f our

out

stan

ding

sto

ck d

urin

g th

e fa

ll of

201

4 al

one

com

pare

d w

ith a

ppro

xim

atel

y 20

% in

th

e fa

ll of

201

2.

inve

stor

con

fere

nces

in 2

014,

dou

blin

g pa

rtic

ipat

ion

com

pare

d w

ith 2

012.

-tio

nal i

nves

tor t

rips

to A

sia,

Eur

ope

and

Latin

Am

eric

a.

SHA

REH

OLD

ERS

HO

W W

E D

O B

USI

NES

S —

OU

R R

ELAT

ION

SHIP

S W

ITH

REG

ULA

TOR

S, S

HA

REH

OLD

ERS

AN

D C

OM

MU

NIT

IES

79

Resp

onsi

vene

ss to

sha

reho

lder

fe

edba

ck

Feed

back

is e

ffect

ive

only

if y

ou c

onsi

der

it th

ough

t-fu

lly a

nd s

erio

usly

and

are

will

ing

to a

ct o

n it

if ap

pro-

pria

te. M

any

of th

e st

eps

we

have

take

n to

impr

ove

our

gove

rnan

ce a

nd c

ontr

ols

that

hav

e be

en d

iscu

ssed

ea

rlie

r in

this

rep

ort a

re c

onsi

sten

t with

sha

reho

lder

in

put.

For

exam

ple,

in r

espo

nse

to s

hare

hold

er

feed

back

, the

Boa

rd:

-m

ent a

nd th

e fin

anci

al s

ervi

ces

indu

stry

Prin

cipl

es to

cod

ify th

e in

depe

nden

ce o

f our

Bo

ard’

s le

ader

ship

Shar

ehol

der

feed

back

als

o ha

s le

d us

to c

reat

e m

ore

oppo

rtun

ities

for

a br

oade

r sh

areh

olde

r ba

se to

inte

ract

w

ith o

ur s

enio

r m

anag

emen

t. At

the

com

pany

’s 20

14

inve

stor

con

fere

nces

, in

addi

tion

to h

eari

ng fr

om th

e co

mpa

ny’s

CEO,

sha

reho

lder

s he

ard

busi

ness

upd

ates

fr

om th

e CE

Os

of C

onsu

mer

& C

omm

unity

Ban

king

, the

Co

rpor

ate

& In

vest

men

t Ban

k, C

omm

erci

al B

anki

ng

and

Asse

t Man

agem

ent,

the

Chie

f Fin

anci

al O

ffice

r of

Co

nsum

er &

Com

mun

ity B

anki

ng a

nd th

e co

mpa

ny’s

Chie

f Inf

orm

atio

n O

ffice

r. An

d, a

s no

ted

in th

e in

trod

uc-

tion,

this

repo

rt is

itse

lf a

resp

onse

to fe

edba

ck fr

om

one

of o

ur v

alue

d sh

areh

olde

r gr

oups

.

All t

hese

cha

nges

refle

ct o

ur c

omm

itmen

t to

taki

ng

seri

ousl

y th

e fe

edba

ck w

e re

ceiv

e. T

he m

ost r

ecen

t fe

edba

ck fr

om o

ur s

hare

hold

ers

tells

us

that

we

are

mov

ing

in th

e ri

ght d

irect

ion.

In a

sur

vey

of In

vest

or D

ay

atte

ndee

s, n

earl

y 90

% o

f par

ticip

ants

repo

rted

that

th

ey fo

und

Inve

stor

Day

eith

er “

valu

able

” or

“ex

trem

ely

valu

able

.” M

ore

than

hal

f of t

he s

urve

y pa

rtic

ipan

ts

indi

cate

d th

at th

e ev

ent c

hang

ed th

eir

perc

eptio

n of

the

com

pany

’s fu

ture

pro

spec

ts fo

r th

e be

tter

.

Expa

nded

acc

essi

bilit

y of

sha

reho

lder

di

sclo

sure

s

One

are

a in

whi

ch w

e ha

ve w

orke

d ha

rd to

impr

ove

is

mak

ing

our

publ

ic d

ocum

ents

mor

e us

er fr

iend

ly, e

asie

r to

und

erst

and

and

mor

e ac

cess

ible

to th

e co

mpa

ny’s

entir

e ra

nge

of s

hare

hold

ers.

We

have

foun

d th

at

seem

ingl

y m

inor

cha

nges

, suc

h as

pre

sent

ing

info

r-m

atio

n in

a g

raph

ic ra

ther

than

in a

pur

ely

text

ual

form

at, h

ave

a m

ajor

impa

ct o

n ou

r sh

areh

olde

rs’

abili

ty to

effe

ctiv

ely

use

the

info

rmat

ion

we

prov

ide.

Fo

r ex

ampl

e, w

e m

odifi

ed th

e st

ruct

ure

and

cont

ent

of o

ur p

roxy

sta

tem

ent i

n 20

14 to

sim

plify

it a

nd m

ore

clea

rly

pres

ent t

he is

sues

, act

ions

bei

ng c

alle

d fo

r an

d av

aila

ble

optio

ns. O

ne s

uch

mod

ifica

tion

invo

lved

ad

ding

a C

ompe

nsat

ion

Disc

losu

re &

Ana

lysi

s Ro

ad M

ap

to th

e co

mpe

nsat

ion

disc

ussi

on to

ass

ist s

hare

hold

ers

in

unde

rsta

ndin

g an

d as

sess

ing

the

alig

nmen

t bet

wee

n ou

r co

mpa

ny’s

perf

orm

ance

and

our

pay

pra

ctic

es.

SHA

REH

OLD

ERS

HO

W W

E D

O B

USI

NES

S —

OU

R R

ELAT

ION

SHIP

S W

ITH

REG

ULA

TOR

S, S

HA

REH

OLD

ERS

AN

D C

OM

MU

NIT

IES

80 COM

MU

NIT

IES

We

belie

ve o

ur c

ompa

ny h

as a

resp

onsi

bilit

y to

be

part

of

the

solu

tion

to th

e m

ost p

ress

ing

econ

omic

, env

i-ro

nmen

tal a

nd s

ocia

l cha

lleng

es —

not

onl

y be

caus

e it

is th

e ri

ght t

hing

to d

o bu

t bec

ause

our

ow

n lo

ng-t

erm

su

cces

s de

pend

s on

the

succ

ess

of o

ur c

omm

uniti

es

and

the

peop

le, c

ompa

nies

and

inst

itutio

ns w

e se

rve.

W

e ca

n he

lp m

ake

a di

ffere

nce

by le

vera

ging

the

skill

s,

tech

nolo

gy, d

ata

and

expe

rtis

e w

e us

e to

dri

ve o

ur o

wn

busi

ness

to m

eet t

hese

glo

bal c

halle

nges

. But

we

know

w

e ar

e on

ly o

ne p

art o

f the

sol

utio

n. T

he c

halle

nges

are

co

mpl

ex, a

nd fi

ndin

g so

lutio

ns re

quire

s ta

ppin

g in

to th

e ex

pert

ise

of in

divi

dual

s an

d or

gani

zatio

ns w

ith a

rang

e of

diff

eren

t per

spec

tives

, ski

lls a

nd c

apab

ilitie

s. S

tron

g pa

rtne

rshi

ps a

nd ro

bust

eng

agem

ent a

mon

g th

e pu

blic

, pr

ivat

e an

d no

npro

fit s

ecto

rs a

re e

ssen

tial.

Core

to o

ur a

ppro

ach

is o

ur w

ork

with

civ

ic a

nd

nonp

rofit

lead

ers

who

hav

e a

deep

his

tory

in a

nd

know

ledg

e of

thei

r co

mm

uniti

es, a

s w

ell a

s w

ith g

roup

s th

at h

ave

subs

tant

ive

expe

rtis

e on

a ra

nge

of e

cono

mic

, en

viro

nmen

tal a

nd s

ocia

l iss

ues.

The

se p

artn

ersh

ips

stre

ngth

en o

ur re

latio

nshi

ps w

ith o

ur c

omm

uniti

es a

nd

mak

e ou

r co

mpa

ny s

tron

ger

and

bett

er in

form

ed. T

hey

also

hel

p us

dev

elop

pro

duct

s, s

ervi

ces

and

polic

ies

that

ar

e re

spon

sive

to th

e ne

eds

of o

ur c

omm

uniti

es. W

e ne

ed to

bot

h un

ders

tand

our

com

mun

ities

’ per

spec

tives

an

d cl

earl

y co

mm

unic

ate

with

them

abo

ut o

ur s

trat

egy,

pr

actic

es a

nd p

erfo

rman

ce.

Our

com

pany

wor

ks to

str

engt

hen

our

com

mun

ities

th

roug

h ou

r co

re le

ndin

g ac

tiviti

es, a

s w

ell a

s th

roug

h un

ique

initi

ativ

es th

at w

e ha

ve d

esig

ned

to m

eet t

he

cent

ral e

cono

mic

cha

lleng

es o

f our

com

mun

ities

, fro

m

prep

arin

g a

wor

kfor

ce to

thri

ve in

the

glob

al e

cono

my

to

expa

ndin

g pr

ivat

e ca

pita

l inv

estm

ent i

n co

nser

vatio

n.

Grow

ing

smal

l bus

ines

ses

Whe

n w

e he

lp o

ur c

lient

s su

ccee

d, th

ey, i

n tu

rn,

gene

rate

the

jobs

, sm

all b

usin

ess

grow

th a

nd o

ther

ec

onom

ic a

ctiv

ity u

pon

whi

ch o

ur e

cono

my

depe

nds.

W

hile

we

are

com

mitt

ed to

ser

ving

all

our

busi

ness

cl

ient

s, o

ne a

rea

of p

artic

ular

focu

s is

the

wor

k w

e do

to

hel

p sm

all b

usin

esse

s ac

quire

the

capi

tal,

expe

rtis

e an

d ot

her

reso

urce

s ne

eded

in o

rder

to g

row

. Sm

all

busi

ness

es a

re th

e co

rner

ston

e of

loca

l com

mun

ities

, cr

eatin

g jo

bs a

nd s

purr

ing

inno

vatio

n.

We

also

are

wor

king

to h

elp

bols

ter t

he s

uppo

rt s

yste

ms

that

sm

all b

usin

esse

s ne

ed in

ord

er to

thriv

e. In

201

4, w

e la

unch

ed S

mal

l Bus

ines

s Fo

rwar

d, a

$30

mill

ion,

five

-yea

r gr

ant p

rogr

am to

con

nect

sm

all b

usin

esse

s an

d en

tre-

pren

eurs

with

crit

ical

reso

urce

s to

hel

p th

eir c

ompa

nies

gr

ow, c

reat

e jo

bs a

nd s

tren

gthe

n co

mm

uniti

es. T

hrou

gh

this

initi

ativ

e, o

ur c

ompa

ny is

fund

ing

nonp

rofit

org

aniz

a-tio

ns th

at w

ork

with

sm

all b

usin

esse

s co

ncen

trat

ed in

a

sing

le s

ecto

r — s

uch

as h

ealth

, cle

an te

chno

logy

, int

erac

-tiv

e m

edia

or a

dvan

ced

man

ufac

turin

g —

and

hel

p th

em

acce

ss c

apita

l, m

anag

emen

t tra

inin

g, s

kille

d w

orke

rs,

supp

ly c

hain

s, fa

cilit

ies

and

new

mar

kets

.

We

prov

ided

$19

bill

ion

in n

ew c

redi

t to

U.S

. sm

all

COM

MU

NIT

IES

HO

W W

E D

O B

USI

NES

S —

OU

R R

ELAT

ION

SHIP

S W

ITH

REG

ULA

TOR

S, S

HA

REH

OLD

ERS

AN

D C

OM

MU

NIT

IES

81

Fina

ncin

g go

vern

men

ts a

nd p

rom

otin

g

glob

al c

ompe

titi

vene

ss

The

wor

ld’s

gove

rnm

ents

, cen

tral

ban

ks, s

over

eign

in

vest

ors,

mul

tilat

eral

inst

itutio

ns, p

ublic

pen

sion

fu

nds,

nat

iona

l dev

elop

men

t ban

ks a

nd o

ther

pub

lic

inst

itutio

ns p

lace

thei

r co

nfide

nce

in u

s to

man

age

thei

r fin

anci

al a

sset

s or

liab

ilitie

s, r

aise

cap

ital,

hedg

e fin

anci

al r

isks

, or

capt

ure

effici

enci

es in

mak

ing

paym

ents

or

colle

ctin

g re

venu

e. W

e w

ork

with

mor

e th

an 5

50 p

ublic

sec

tor

entit

ies

in 1

30 c

ount

ries

w

orld

wid

e, h

elpi

ng th

em to

fulfi

ll vi

tal p

ublic

man

date

s ev

ery

day

thro

ugh

the

effec

tive

man

agem

ent o

f the

ir

finan

cial

affa

irs.

In th

e U

nite

d St

ates

, sta

te a

nd lo

cal

gove

rnm

ents

pla

ce th

eir

confi

denc

e in

our

exp

ertis

e on

issu

es r

angi

ng fr

om p

lann

ing

and

deve

lopm

ent t

o ta

x pr

oces

sing

, util

ities

, fina

nce,

pro

cure

men

t, pu

blic

sa

fety

and

dis

aste

r re

lief.

In 2

013,

we

rais

ed c

apita

l an

d pr

ovid

ed c

redi

t tot

alin

g $7

9 bi

llion

for

nonp

rofit

an

d go

vern

men

t ent

ities

, inc

ludi

ng s

tate

s, m

unic

i-pa

litie

s, h

ospi

tals

and

uni

vers

ities

. Thr

ough

the

thir

d qu

arte

r of

201

4, th

is n

umbe

r re

ache

d $5

9 bi

llion

of

cred

it an

d ca

pita

l.

We

also

wor

k to

equ

ip m

etro

polit

an a

nd c

ity le

ader

s w

ith th

e pr

actic

al k

now

ledg

e, p

olic

y id

eas

and

netw

orks

th

at c

an b

e us

ed to

mak

e th

eir r

egio

ns m

ore

com

petit

ive

in th

e gl

obal

mar

ketp

lace

. The

Glo

bal C

ities

Initi

ativ

e,

a jo

int p

roje

ct o

f JPM

orga

n Ch

ase

and

the

Broo

king

s In

stitu

tion,

aim

s to

hel

p m

etro

polit

an a

reas

use

glo

bal

trad

e an

d en

gage

men

t to

grow

thei

r ec

onom

ies

and

crea

te jo

bs.

In 2

013,

in a

n eff

ort t

o tr

ansf

orm

kno

wle

dge

abou

t gl

obal

trad

e an

d in

vest

men

t int

o lo

cal a

ctio

n, th

e Gl

obal

Ci

ties

Initi

ativ

e la

unch

ed th

e Gl

obal

Citi

es E

xcha

nge.

The

ex

chan

ge is

gui

ding

a n

etw

ork

of e

cono

mic

dev

elop

men

t pr

actit

ione

rs in

citi

es a

roun

d th

e w

orld

to d

evel

op a

nd

impl

emen

t act

iona

ble

stra

tegi

es to

enh

ance

glo

bal t

rade

an

d fo

rge

part

ners

hips

am

ong

glob

al m

etro

polit

an a

reas

.

Stre

ngth

enin

g w

orkf

orce

rea

dine

ss a

nd

clos

ing

the

skill

s ga

p

Whi

le u

nem

ploy

men

t rat

es re

mai

n hi

gh in

com

mun

ities

ar

ound

the

wor

ld, m

any

empl

oyer

s ar

e ha

ving

trou

ble

findi

ng w

orke

rs w

ho a

re tr

aine

d fo

r th

e jo

bs th

at a

re

avai

labl

e. T

his

shor

tage

of w

orke

rs w

ith th

e sk

ills

that

em

ploy

ers

are

dem

andi

ng is

due

, in

part

, to

a la

ck o

f al

ignm

ent b

etw

een

wor

kfor

ce tr

aini

ng p

rogr

ams

and

the

need

s of

loca

l em

ploy

ers.

New

Ski

lls a

t Wor

k is

a $

250

mill

ion,

five

-yea

r pr

ogra

m

to in

form

and

acc

eler

ate

effor

ts to

trai

n pe

ople

for

the

skill

ed jo

bs o

f the

21s

t cen

tury

. Thr

ough

New

Ski

lls a

t W

ork,

we

are

cond

uctin

g re

sear

ch a

imed

at i

dent

ifyin

g th

e sk

ills

gaps

that

exi

st in

mar

kets

acr

oss

the

Unite

d St

ates

and

in s

elec

t cou

ntri

es in

Eur

ope.

We

also

are

fu

ndin

g be

st-in

-cla

ss n

onpr

ofit p

rogr

ams

with

dem

on-

stra

ted

succ

ess

in tr

aini

ng w

orke

rs fo

r hi

gh-d

eman

d jo

bs. A

nd w

e ar

e co

nven

ing

lead

ers

from

acr

oss

sect

ors

to d

iscu

ss w

ays

to s

tren

gthe

n w

orkf

orce

read

ines

s sy

stem

s, b

ased

on

the

best

evi

denc

e an

d le

arni

ngs.

Inve

stin

g in

Det

roit

The

city

of D

etro

it fa

ces

seri

ous

chal

leng

es, b

ut th

e se

eds

of a

rem

arka

ble

turn

arou

nd a

re u

nder

way

. Our

co

mpa

ny h

as b

een

doin

g bu

sine

ss in

Det

roit

for

mor

e th

an 8

0 ye

ars,

and

we

are

com

mitt

ed to

the

city

’s ec

onom

ic re

cove

ry. I

n 20

14, w

e m

ade

a $1

00 m

illio

n,

five-

year

com

mitm

ent t

o ac

cele

rate

the

city

’s eff

orts

to

rega

in it

s ec

onom

ic s

tren

gth

with

a c

ompr

ehen

sive

st

rate

gy fo

cuse

d on

revi

taliz

ing

Detr

oit’s

nei

ghbo

r-ho

ods,

inve

stin

g in

the

infr

astr

uctu

re th

at s

uppo

rts

econ

omic

gro

wth

, red

ucin

g bl

ight

, str

engt

heni

ng th

e ci

ty’s

wor

kfor

ce, a

nd g

row

ing

smal

l bus

ines

ses.

This

effo

rt w

as d

evel

oped

bas

ed o

n ex

tens

ive

cons

ulta

-tio

ns w

ith D

etro

it’s

gove

rnm

ent a

nd c

omm

unity

lead

ers

and

prov

ides

not

onl

y lo

ng-t

erm

fina

ncia

l sup

port

but

al

so th

e ex

pert

ise

of o

ur e

mpl

oyee

s in

sup

port

ing

the

orga

niza

tions

that

are

wor

king

to a

ddre

ss th

e ci

ty’s

mos

t pre

ssin

g ch

alle

nges

.

COM

MU

NIT

IES

HO

W W

E D

O B

USI

NES

S —

OU

R R

ELAT

ION

SHIP

S W

ITH

REG

ULA

TOR

S, S

HA

REH

OLD

ERS

AN

D C

OM

MU

NIT

IES

82 Prom

otin

g fin

anci

al c

apab

ility

Acro

ss th

e Un

ited

Stat

es a

nd a

roun

d th

e w

orld

, man

y pe

ople

lack

the

tool

s an

d re

sour

ces

to m

anag

e th

eir d

aily

fin

anci

al li

ves,

whe

ther

for u

nexp

ecte

d em

erge

ncie

s or

to

pla

n fo

r the

futu

re. T

he F

inan

cial

Sol

utio

ns L

ab (t

he

Lab)

, whi

ch w

e he

lped

cre

ate

with

a $

30 m

illio

n gr

ant t

o th

e Ce

nter

for F

inan

cial

Ser

vice

s In

nova

tion,

is d

esig

ned

to u

ncov

er a

nd s

hare

rese

arch

-driv

en in

sigh

ts to

iden

tify

the

mos

t pre

ssin

g fin

anci

al c

halle

nges

face

d by

low

- and

m

oder

ate-

inco

me

cons

umer

s. In

201

5, th

e La

b w

ill la

unch

a

com

petit

ion

for s

ocia

l ent

repr

eneu

rs to

iden

tify

tech

nol-

ogy-

enab

led

inno

vatio

ns th

at h

elp

peop

le in

crea

se sa

ving

s,

impr

ove

cred

it an

d bu

ild a

sset

s. T

he L

ab a

lso

will

pro

vide

se

ed fu

ndin

g fo

r pot

entia

l bre

akth

roug

h to

ols

and

serv

ices

to

hel

p fa

mili

es b

ette

r man

age

hous

ehol

d fin

ance

s.

Adva

ncin

g in

vest

men

t in

cons

erva

tion

Ther

e is

a g

row

ing

need

to m

axim

ize

the

pace

, sca

le a

nd

effec

tiven

ess

of e

ffort

s to

pro

tect

nat

ural

eco

syst

ems

—

alon

g w

ith th

e ci

ties

and

com

mun

ities

that

rely

on

them

. JP

Mor

gan

Chas

e an

d Th

e Na

ture

Con

serv

ancy

des

igne

d Na

ture

Vest

to c

reat

e ne

w o

ppor

tuni

ties

for p

rivat

e se

ctor

inve

stm

ent o

f cap

ital i

n co

nser

vatio

n pr

ojec

ts.

Natu

reVe

st w

ill fo

ster

way

s to

adv

ance

inve

stm

ent i

n co

nser

vatio

n by

con

veni

ng in

vest

ors;

dev

elop

ing

and

exec

utin

g in

nova

tive

finan

cial

tran

sact

ions

; and

bui

ldin

g an

inve

stm

ent p

ipel

ine

acro

ss m

ultip

le s

ecto

rs, i

nclu

ding

ag

ricul

ture

, fish

erie

s an

d en

viro

nmen

tal m

arke

ts.

Enga

ging

em

ploy

ees

to s

tren

gthe

n co

mm

unit

ies

We

have

a tr

emen

dous

opp

ortu

nity

to h

arne

ss o

ur

empl

oyee

s’ p

assi

on fo

r gi

ving

bac

k to

the

com

mun

i-tie

s w

here

they

live

and

wor

k. E

ach

year

, we

stri

ve to

pr

ovid

e ou

r em

ploy

ees

with

mea

ning

ful a

nd n

eede

d vo

lunt

eer

oppo

rtun

ities

that

hel

p th

e no

npro

fits

who

se v

italit

y st

reng

then

s ou

r co

mm

uniti

es. I

n 20

13,

mor

e th

an 4

7,000

em

ploy

ee v

olun

teer

s pr

ovid

ed o

ver

540,

000

hour

s of

vol

unte

er s

ervi

ce a

nd o

rgan

ized

clo

se

to 2

,200

vol

unte

er e

vent

s gl

obal

ly.

We

also

kno

w th

at th

e ex

pert

ise

of o

ur e

mpl

oyee

s ar

ound

the

wor

ld is

our

mos

t val

uabl

e re

sour

ce. T

o he

lp

build

the

capa

city

of o

ur n

onpr

ofit p

artn

ers

and

prov

ide

our

empl

oyee

s w

ith a

bro

ader

men

u of

ser

vice

opp

ortu

-ni

ties

that

dev

elop

lead

ersh

ip s

kills

, we

are

expa

ndin

g ou

r sk

ills-

base

d vo

lunt

eer

prog

ram

s, w

here

we

mat

ch

the

skill

s of

our

peo

ple

with

the

spec

ific

need

s of

loca

l no

npro

fits.

In N

ovem

ber

2014

, we

depl

oyed

a d

ozen

of

our

empl

oyee

s to

wor

k in

Det

roit

full

time

for

seve

ral

wee

ks o

n sp

ecifi

c pr

ojec

ts id

entifi

ed a

s pr

iori

ties

by fo

ur

of o

ur n

onpr

ofit p

artn

ers.

Org

aniz

atio

nal i

mpr

ovem

ents

In 2

013,

to im

prov

e th

e effi

cien

cy a

nd im

pact

of o

ur

wor

k, w

e co

nduc

ted

an e

xten

sive

eva

luat

ion

of o

ur

appr

oach

to w

orki

ng w

ith n

onpr

ofits

at t

he lo

cal,

regi

onal

and

nat

iona

l lev

els.

As

a re

sult

of o

ur fi

ndin

gs,

we

esta

blis

hed

a ne

w O

ffice

of N

onpr

ofit E

ngag

emen

t (O

NE)

to c

oord

inat

e pa

rtne

rshi

ps a

cros

s al

l our

line

s of

bus

ines

s, s

tren

gthe

n ou

r re

latio

nshi

ps w

ith c

urre

nt

nonp

rofit

par

tner

s, id

entif

y ne

w p

artn

ersh

ip o

ppor

tuni

-tie

s an

d se

rve

as a

sin

gle

poin

t of c

onta

ct fo

r co

mm

unity

de

velo

pmen

t non

profi

ts s

eeki

ng to

eng

age

the

com

pany

.

Thro

ugh

ONE,

we

incr

ease

d th

e nu

mbe

r of r

egio

nal

com

mun

ity re

latio

ns m

anag

ers,

bas

ed th

roug

hout

the

Unite

d St

ates

. The

ir ro

le is

to w

ork

clos

ely

with

non

profi

ts

and

thin

k cr

eativ

ely

abou

t the

val

ue w

e ca

n bu

ild th

roug

h ne

w a

nd e

xpan

ded

part

ners

hips

. We

also

are

exp

andi

ng

our w

ork

with

nat

iona

l non

profi

t org

aniz

atio

ns fo

cuse

d on

low

- and

mod

erat

e-in

com

e co

mm

unity

dev

elop

men

t.

Our

dee

p an

d su

stai

ned

enga

gem

ent w

ith th

ose

we

serv

e al

low

s us

to d

evel

op th

e st

rate

gies

, pro

gram

s an

d po

licie

s th

at h

elp

us to

war

d m

akin

g a

diffe

renc

e ev

ery

sing

le d

ay. O

ver

the

past

yea

rs, w

e ha

ve g

reat

ly

enha

nced

that

eng

agem

ent,

whi

ch h

as y

ield

ed s

igni

f-ic

ant i

mpr

ovem

ents

in h

ow w

e se

rve

and

supp

ort o

ur

clie

nts,

cus

tom

ers

and

the

com

mun

ities

in w

hich

we

oper

ate.

Goi

ng fo

rwar

d, w

e in

tend

to b

uild

on

that

foun

-da

tion,

reco

gniz

ing

that

ther

e al

way

s is

mor

e w

e ca

n do

to

del

iver

a p

ositi

ve im

pact

.

COM

MU

NIT

IES

VI.

A C

ON

TIN

UIN

G E

FFO

RT

HO

W W

E D

O B

USI

NES

S —

OU

R R

ELAT

ION

SHIP

S W

ITH

REG

ULA

TOR

S, S

HA

REH

OLD

ERS

AN

D C

OM

MU

NIT

IES

84

HO

W W

E D

O B

USI

NES

S —

A C

ON

TIN

UIN

G E

FFO

RT85

A C

ON

TIN

UIN

G E

FFO

RT

The

actio

ns d

escr

ibed

in th

is re

port

refle

ct a

com

pany

th

at is

com

mitt

ed to

impr

ovin

g. T

hese

effo

rts

have

bee

n as

muc

h ab

out l

ooki

ng to

the

futu

re a

s th

ey h

ave

been

ab

out r

eflec

ting

on th

e pa

st. A

s su

ch, o

ur e

xam

inat

ion

has

give

n us

insi

ghts

that

will

bot

h he

lp u

s do

bus

ines

s th

e ri

ght w

ay to

day

and

prep

are

for

chal

leng

es th

at m

ay

lie a

head

.

The

less

ons

we

have

lear

ned

over

the

past

sev

eral

ye

ars

rein

forc

e th

e im

port

ance

of h

avin

g ou

tsta

ndin

g pe

ople

and

a s

tron

g cu

lture

. Our

sen

ior

man

agem

ent

team

, with

sup

port

and

eng

agem

ent f

rom

the

Boar

d of

Di

rect

ors,

has

focu

sed

on s

ettin

g th

e ri

ght t

one

from

the

top

by c

lear

ly c

omm

unic

atin

g ou

r co

rpor

ate

stan

dard

s to

our

em

ploy

ees.

Thr

ough

our

Bus

ines

s Pr

inci

ples

, tha

t to

ne e

choe

s th

roug

h ev

eryt

hing

we

do a

nd is

del

iver

ed

to o

ur p

eopl

e at

eac

h st

age

of th

e em

ploy

ee li

fe c

ycle

—

from

new

hire

trai

ning

to h

ow w

e re

war

d em

ploy

ees

for

doin

g th

e ri

ght t

hing

. Thi

s he

lps

our

peop

le in

ter-

naliz

e th

e co

mpa

ny’s

valu

es, s

how

up

at w

ork

each

day

co

mm

itted

to li

ving

our

mis

sion

and

adh

erin

g to

our

Bu

sine

ss P

rinc

iple

s.

Our

em

ploy

ees

are

our f

ront

line

in s

ervi

ng o

ur

cust

omer

s, a

nd th

ey a

lso

are

our f

ront

line

in p

rote

ctin

g th

e co

mpa

ny. W

e re

cogn

ize

that

they

mus

t be

supp

orte

d by

a w

ell-f

unct

ioni

ng c

ontr

ol e

nviro

nmen

t. Th

e en

hanc

e-m

ents

we

have

mad

e ar

ound

gov

erna

nce

and

polic

ies

and

our i

nves

tmen

ts in

peo

ple

and

tech

nolo

gy h

ave

been

un

prec

eden

ted

in o

ur c

ompa

ny’s

hist

ory.

Whi

le th

ese

effor

ts a

re o

ngoi

ng, w

e be

lieve

thei

r sca

le a

nd b

read

th

dem

onst

rate

our

com

mitm

ent t

o ge

ttin

g it

right

.

With

out

stan

ding

peo

ple

and

wel

l-fun

ctio

ning

con

trol

s,

our

busi

ness

es c

an fo

cus

on w

hat t

hey

do b

est:

serv

ing

cust

omer

s. E

ach

of o

ur b

usin

esse

s co

ntin

ues

to e

nhan

ce

its c

usto

mer

exp

erie

nce

by o

fferi

ng n

ew p

rodu

cts

and

solu

tions

, exp

andi

ng in

to n

ew g

eogr

aphi

es, a

nd

impr

ovin

g ex

istin

g ca

pabi

litie

s an

d pr

oces

ses.

We

hope

that

, thr

ough

the

open

info

rmat

ion

shar

ing

embo

died

thro

ugho

ut th

is re

port

, our

sha

reho

lder

s an

d ot

hers

will

see

wha

t our

peo

ple

see

each

day

: Our

co

mpa

ny is

wor

king

har

d to

mee

t the

nee

ds o

f our

cu

stom

ers;

live

up

to th

e ex

pect

atio

ns o

f our

regu

la-

tors

, sha

reho

lder

s an

d th

e co

mm

uniti

es w

e se

rve;

and

co

ntin

ue th

e st

eps

that

will

ena

ble

the

com

pany

to s

tand

th

e te

st o

f tim

e.

We

have

cha

nged

a lo

t and

lear

ned

even

mor

e as

a

resu

lt of

the

effor

ts d

escr

ibed

in th

is re

port

. We

are

dedi

cate

d to

mak

ing

this

pro

cess

of s

elf-e

xam

inat

ion

and

impr

ovem

ent a

par

t of o

ur b

usin

ess-

as-u

sual

op

erat

ions

to s

uppo

rt o

ur g

oal t

o liv

e up

to o

ur g

uidi

ng

prin

cipl

e —

to d

o “o

nly

first

-cla

ss b

usin

ess

and

that

in a

fir

st-c

lass

way

.”

HO

W W

E D

O B

USI

NES

S —

A C

ON

TIN

UIN

G E

FFO

RT86

VII

. A

PP

END

IX

HO

W W

E D

O B

USI

NES

S —

APP

END

IX89

EXCE

PTI

ON

AL

CLIE

NT

SER

VIC

E

1. W

e fo

cus

on th

e cu

stom

er

W

e m

ust r

emem

ber

that

we

are

in b

usin

ess

for

one

reas

on: t

o se

rve

our

clie

nts.

Our

job

is to

alw

ays

do

righ

t by

them

and

con

sist

ently

str

ive

not o

nly

to m

eet

thei

r ne

eds

but a

lso

to e

xcee

d th

eir

expe

ctat

ions

and

co

ntin

ually

mak

e it

easy

for

clie

nts

to d

o bu

sine

ss w

ith

us. J

PMor

gan

Chas

e bu

ilds

for

the

long

term

, and

we

are

not a

fair

wea

ther

frie

nd. C

lient

s, c

omm

uniti

es

and

coun

trie

s w

ant t

o kn

ow w

e ar

e go

ing

to b

e th

ere

for

them

in g

ood

times

and

, mor

e im

port

ant,

whe

n tim

es a

re to

ugh.

Eur

ope

is a

n ex

ampl

e of

whe

re w

e ha

ve a

pplie

d th

is p

hilo

soph

y. W

hen

Gree

ce, I

rela

nd,

Italy

, Por

tuga

l and

Spa

in g

ot in

to tr

oubl

e ov

er th

e pa

st fe

w y

ears

, we

mad

e th

e de

cisi

on to

sta

y th

e co

urse

(eve

n th

ough

und

er te

rrib

le s

cena

rios

, we

coul

d ha

ve lo

st $

5 bi

llion

or

mor

e). B

ut w

e ha

ve b

een

doin

g bu

sine

ss w

ith c

lient

s in

thos

e co

untr

ies,

in s

ome

case

s, fo

r m

ore

than

a h

undr

ed y

ears

. We

need

ed to

he

lp th

em in

thei

r tim

e of

trou

ble

— a

nd w

e di

d —

and

w

e’ll

do s

o ag

ain

in th

e fu

ture

if th

e ne

ed a

rise

s. W

e ho

pe to

be

doin

g bu

sine

ss in

that

par

t of t

he w

orld

for

deca

des

to c

ome.

2. W

e ar

e fie

ld a

nd c

lient

dri

ven;

we

oper

ate

at

the

loca

l lev

el

Tr

ue c

usto

mer

ori

enta

tion

mea

ns a

ctin

g in

the

cust

omer

’s be

st in

tere

st —

not

onc

e in

a w

hile

but

all

the

time.

Thi

s m

eans

offe

ring

out

stan

ding

pro

duct

s an

d se

rvic

es a

nd b

eing

hel

pful

, cou

rteo

us a

nd q

uick

to

follo

w u

p. It

als

o re

quire

s ad

optin

g an

out

war

d —

not

an

inw

ard

— fo

cus

and

resp

ondi

ng to

the

com

peti-

tion.

We

need

to b

e ke

enly

aw

are

of th

e co

mpe

titiv

e la

ndsc

ape

and

be s

wift

to a

ct. T

he fi

eld

— w

here

our

em

ploy

ees

are

clos

est t

o th

e cu

stom

er —

sho

uld

driv

e th

is p

roce

ss w

ith th

e am

ple

reso

urce

s an

d au

thor

ity to

be

the

best

at s

ervi

ng c

usto

mer

s. O

ur s

tren

gth

resi

des

in th

e fie

ld.

3. W

e bu

ild w

orld

-cla

ss fr

anch

ises

, inv

esti

ng

for

the

long

term

, to

serv

e ou

r cl

ient

s

A

mar

k of

an

exce

ptio

nal c

ompa

ny is

its

abili

ty to

se

rve

its c

lient

s an

d ou

tper

form

its

com

petit

ors

over

a

sust

aine

d pe

riod

of t

ime,

rega

rdle

ss o

f eco

nom

ic

cond

ition

s. A

ny c

ompa

ny c

an im

prov

e ea

rnin

gs in

the

shor

t run

by

taki

ng o

n ad

ditio

nal r

isk

or c

uttin

g ba

ck

on in

vest

men

ts. B

ut it

may

be

the

kind

of g

row

th o

ne

com

es to

regr

et. A

t JPM

orga

n Ch

ase,

our

obl

igat

ion

is to

bui

ld a

com

pany

that

can

thri

ve in

any

env

i-ro

nmen

t. To

ach

ieve

thes

e re

sults

, we

mus

t pro

vide

ou

r cu

stom

ers

with

a b

road

, com

plet

e an

d hi

gh-

qual

ity s

et o

f pro

duct

s an

d se

rvic

es w

hile

leve

ragi

ng

the

bene

fits

and

effici

ency

that

com

e w

ith s

cale

. In

addi

tion,

we

mus

t dem

onst

rate

our

abi

lity

to g

row

bo

th fr

om w

ithin

(e.g

., ne

w p

rodu

cts,

mar

ket s

hare

ga

ins)

and

by

acqu

isiti

on. F

inal

ly, w

e m

ust d

emon

-st

rate

that

the

who

le is

gre

ater

than

the

sum

of t

he

part

s. E

ach

busi

ness

fuel

s an

d co

mpl

emen

ts th

e ot

hers

, pro

vidi

ng s

ubst

antia

l com

petit

ive

adva

ntag

es

and

grea

t glo

bal b

rand

s.

OU

R B

USI

NES

S P

RIN

CIP

LES:

HO

W W

E D

O B

USI

NES

S —

APP

END

IX90

4. W

e se

t the

hig

hest

sta

ndar

ds o

f pe

rfor

man

ce

It

is u

p to

eac

h co

mpa

ny, e

ach

lead

ersh

ip te

am

and

each

indi

vidu

al to

set

thei

r ow

n st

anda

rds

of

perf

orm

ance

. Our

s w

ill b

e th

e hi

ghes

t. W

e w

ill

neve

r sh

y aw

ay fr

om c

ompa

ring

our

selv

es w

ith

the

best

com

pani

es, k

now

ing

that

we

may

com

e up

sho

rt. S

triv

ing

to b

e th

e be

st is

wha

t mot

ivat

es

us to

see

k co

ntin

ual i

mpr

ovem

ent.

In a

dditi

on,

we

will

rem

embe

r th

at in

divi

dual

per

form

ance

is

n’t a

lway

s ea

sy to

judg

e. M

anag

ers

resp

onsi

ble

for

a bu

sine

ss m

ust e

valu

ate

indi

vidu

als

alon

g a

spec

trum

of f

acto

rs. D

id th

ese

lead

ers

act w

ith

inte

grity

? D

id th

ese

man

ager

s hi

re a

nd tr

ain

good

pe

ople

? D

id th

ese

man

ager

s bu

ild th

e sy

stem

s an

d pr

oduc

ts th

at w

ill s

tren

gthe

n th

e co

mpa

ny, n

ot ju

st

duri

ng th

e cu

rren

t yea

r bu

t for

futu

re y

ears

? D

id

thes

e m

anag

ers

deve

lop

real

man

agem

ent t

eam

s?

In e

ssen

ce, a

re m

anag

ers

build

ing

som

ethi

ng w

ith

sust

aina

ble,

long

-ter

m v

alue

? M

akin

g th

ese

dete

r-m

inat

ions

req

uire

s co

urag

e an

d ju

dgm

ent.

5. W

e de

man

d fin

anci

al r

igor

and

ris

k di

scip

line;

we

will

alw

ays

mai

ntai

n a

fort

ress

bal

ance

she

et

Fi

nanc

ial d

isci

plin

e is

the

bedr

ock

of a

hea

lthy

and

grow

ing

com

pany

, par

ticul

arly

a fi

nanc

ial i

nsti-

tutio

n. S

ound

acc

ount

ing

stan

dard

s, tr

ansp

aren

t pu

blic

repo

rtin

g an

d ex

celle

nt m

anag

emen

t inf

or-

mat

ion

syst

ems

all l

ead

to h

igh-

qual

ity e

arni

ngs

that

are

recu

rrin

g an

d pr

edic

tabl

e in

nat

ure,

yie

ld

high

retu

rns

on c

apita

l, pr

oduc

e go

od m

argi

ns

and

prov

ide

reas

onab

le r

isk

rela

tive

to th

e ca

pita

l de

ploy

ed. F

inan

cial

dis

cipl

ine

mus

t be

mat

ched

w

ith s

uper

ior

— n

ot ju

st a

vera

ge —

ris

k m

anag

e-m

ent.

If w

e pr

oper

ly m

anag

e ri

sk, w

e sh

ould

get

a

good

retu

rn th

roug

h th

e cy

cle,

not

just

dur

ing

the

good

tim

es. W

e m

ust c

onsi

der

wal

king

aw

ay fr

om

busi

ness

whe

re w

e ca

nnot

see

a fa

ir re

turn

ove

r th

e cy

cle.

Thi

s m

ay s

low

sho

rt-t

erm

gro

wth

, but

it u

nder

-sc

ores

our

com

mitm

ent t

o gr

ow in

a s

usta

inab

le w

ay.

It is

a tr

adeo

ff w

e al

way

s w

ill b

e pr

epar

ed to

mak

e.

An u

nque

stio

nabl

y st

rong

— o

r fo

rtre

ss —

bal

ance

sh

eet i

s cr

itica

l to

man

agin

g ou

r bu

sine

sses

. Hav

ing

appr

opri

ate

rese

rves

, str

ong

capi

tal r

atio

s an

d hi

gh

cred

it ra

tings

allo

ws

us to

with

stan

d di

fficu

lt ev

ents

. It

give

s us

the

flexi

bilit

y to

dep

loy

our

capi

tal a

s w

e se

e fit

— s

uch

as in

crea

sing

our

div

iden

ds, b

uyin

g ba

ck

stoc

k, in

vest

ing

in o

ur b

usin

esse

s, m

akin

g ac

quis

ition

s or

sim

ply

cons

ervi

ng o

ur c

apita

l. W

e w

ill d

eplo

y ou

r ca

pita

l wis

ely

and

will

kee

p in

min

d ou

r sh

areh

olde

rs’

best

inte

rest

s. T

his

is o

ne o

f our

mos

t im

port

ant g

oals

. An

d to

mai

ntai

n ou

r fo

rtre

ss b

alan

ce s

heet

, we

mus

t th

orou

ghly

und

erst

and

all o

ur a

sset

s an

d lia

bilit

ies;

m

ake

sure

that

som

eone

is a

ccou

ntab

le fo

r th

em; u

se

soun

d, e

cono

mic

ally

app

ropr

iate

acc

ount

ing;

and

hav

e st

rong

con

trol

s.

6. W

e st

rive

for

the

best

inte

rnal

gov

erna

nce

and

cont

rols

Go

od in

tern

al g

over

nanc

e is

ess

entia

l to

effec

tive

man

agem

ent.

It ti

es to

geth

er a

ll ou

r bu

sine

sses

w

orld

wid

e w

ith a

com

mon

set

of r

ules

, exp

ecta

tions

an

d ov

ersi

ght a

ctiv

ities

. The

se h

elp

safe

guar

d ou

r re

puta

tion,

whi

ch w

e be

lieve

is o

ne o

f our

mos

t im

port

ant a

sset

s, a

nd a

lign

the

com

pany

’s p

erfo

r-m

ance

with

the

best

inte

rest

s of

our

sha

reho

lder

s.

We

are

com

mitt

ed to

hav

ing

cont

rols

that

are

sec

ond

to n

one.

We

cont

inua

lly w

ork

to b

uild

a c

ultu

re th

at

enco

urag

es a

nd r

ewar

ds s

ound

ris

k m

anag

emen

t, w

ith a

tran

spar

ent f

ram

ewor

k th

at p

enet

rate

s ev

ery

aspe

ct o

f our

bus

ines

s at

eve

ry le

vel.

We

wan

t the

pu

blic

, the

reg

ulat

ors

and

our

shar

ehol

ders

to h

ave

confi

denc

e th

at w

e ar

e th

e sa

fest

and

sou

ndes

t ban

k on

the

plan

et.

OP

ERAT

ION

AL

EXCE

LLEN

CE

HO

W W

E D

O B

USI

NES

S —

APP

END

IX91

7. W

e ac

t and

thin

k lik

e ow

ners

and

par

tner

s

W

e w

ant o

ur e

mpl

oyee

s to

thin

k an

d ac

t lik

e ow

ners

by

hav

ing

a st

ake

in o

ur fi

nanc

ial p

erfo

rman

ce a

nd b

y pa

rtic

ipat

ing

in a

com

pens

atio

n st

ruct

ure

that

is fa

ir

and

perf

orm

ance

bas

ed. B

ig c

ompa

nies

nee

d en

tre-

pren

eurs

and

inno

vato

rs —

and

peo

ple

need

to k

now

th

at it

is a

ccep

tabl

e to

try

even

if th

ey d

on’t

succ

eed.

Bu

reau

crac

y, s

ilos

and

polit

ics

are

the

bane

of l

arge

co

rpor

atio

ns a

nd m

ust b

e co

mba

ted

vigo

rous

ly a

nd

cont

inua

lly. W

hile

app

ropr

iate

rul

es a

nd p

roce

dure

s ar

e cr

itica

lly im

port

ant t

o th

e co

ntro

l and

dis

cipl

ine

of a

n or

gani

zatio

n, u

nnec

essa

ry r

ules

cre

ate

bure

au-

crac

y. B

y de

stro

ying

initi

ativ

e, s

tiflin

g cr

eativ

ity a

nd

unde

rmin

ing

acco

unta

bilit

y, b

urea

ucra

cy m

akes

it

hard

for

peop

le to

do

a go

od jo

b an

d fo

r m

anag

ers

to

man

age

wel

l.

8. W

e st

rive

to b

uild

and

mai

ntai

n th

e be

st,

mos

t effi

cien

t sys

tem

s an

d op

erat

ions

Pr

ofita

ble

com

pani

es c

onsi

sten

tly b

uild

the

best

in

fras

truc

ture

. The

y st

rive

to c

reat

e th

e be

st s

yste

ms

and

oper

atio

ns s

o th

ey c

an m

eet t

heir

cus

tom

ers’

ne

eds

and

exce

ed s

ervi

ce e

xpec

tatio

ns. T

o th

at e

nd,

we

mus

t be

a le

an a

nd e

ffici

ent p

rodu

cer.

It is

not

ju

st a

bout

cut

ting

cost

s. G

reat

per

form

ance

req

uire

s sp

endi

ng m

ore

and

gett

ing

mor

e fr

om e

very

dol

lar

we

allo

cate

. It i

s ir

resp

onsi

ble

to w

aste

our

val

uabl

e re

sour

ces

on e

xpen

ditu

res

that

hav

e no

thin

g to

do

with

bet

ter

serv

ing

our

clie

nts.

We

belie

ve te

ch-

nolo

gy a

nd e

ffici

ent o

pera

tions

are

cri

tical

in th

e fin

anci

al s

ervi

ces

busi

ness

. We

mus

t rel

entle

ssly

fo

cus

on in

tegr

atin

g an

d up

grad

ing

tech

nolo

gy a

nd

on a

ggre

ssiv

ely

cons

olid

atin

g, s

trea

mlin

ing

and

stan

-da

rdiz

ing

our

oper

atio

ns, a

ll of

whi

ch h

elp

to p

ush

deci

sion

mak

ing

and

auth

ority

to th

e fie

ld. W

e ne

ed

to c

ontin

ually

str

ive

to g

ive

our

cust

omer

s m

ore

—

bett

er, f

aste

r an

d ch

eape

r.

9. W

e ar

e di

scip

lined

in e

very

thin

g w

e do

W

ithou

t dis

cipl

ine,

med

iocr

ity r

ules

. Exh

ibiti

ng

disc

iplin

e in

clud

es m

eetin

g al

l our

com

mitm

ents

. Th

is m

eans

hol

ding

regu

lar

busi

ness

revi

ews,

tale

nt

eval

uatio

ns a

nd te

am m

eetin

gs a

nd c

onst

antly

str

ivin

g fo

r im

prov

emen

t — fr

om h

avin

g a

stro

ng w

ork

ethi

c to

mak

ing

lists

and

doi

ng re

al, d

etai

led

follo

w-u

p.

Disc

iplin

ed le

ader

ship

is li

ke e

xerc

ise;

the

regi

men

has

to

be

sust

aine

d fo

r it

to d

o an

y go

od.

10. W

e ex

ecut

e w

ith

both

ski

ll an

d ur

genc

y

Thro

ugho

ut th

e co

mpa

ny, w

e m

ust s

et h

igh

stan

dard

s of

per

form

ance

all

the

time,

at a

det

aile

d le

vel a

nd

with

a re

al s

ense

of u

rgen

cy. L

arge

inst

itutio

ns

have

a te

nden

cy to

war

d sl

owin

g th

ings

dow

n, w

hich

de

man

ds th

at le

ader

s pu

sh fo

rwar

d co

ntin

uous

ly. A

s im

port

ant a

s st

rate

gy is

, str

ong

exec

utio

n is

key

in

ever

y si

ngle

con

tact

we

have

with

eac

h of

our

clie

nts

and

cust

omer

s. T

o ex

ecut

e su

perb

ly, w

e m

ust a

ct

in a

dis

cipl

ined

way

with

gre

at s

peed

. Bur

eauc

racy

ca

n sl

ow u

s do

wn

so it

mus

t be

cont

inua

lly id

entifi

ed

and

erad

icat

ed. F

ast a

nd le

an a

re th

e an

tidot

es to

cr

eepi

ng b

urea

ucra

cy.

HO

W W

E D

O B

USI

NES

S —

APP

END

IX92

11.

We

will

not

com

prom

ise

our

inte

grit

y

Th

ere

is n

o pi

ece

of b

usin

ess,

no

deal

, no

reve

nue

stre

am th

at is

mor

e im

port

ant t

han

our o

blig

atio

n to

ac

t with

resp

onsi

bilit

y, w

ith e

thic

s an

d w

ithin

the

law.

W

e fo

llow

not

onl

y th

e le

tter

but

als

o th

e sp

irit o

f the

ru

les

and

regu

latio

ns th

at g

over

n ou

r ind

ustr

y. T

here

is

no

room

for c

ompr

omis

e. In

bus

ines

s, a

s in

eve

ry

othe

r are

na, e

thic

al b

ehav

ior d

oes

not j

ust h

appe

n.

It ha

s to

be

culti

vate

d an

d re

peat

edly

affi

rmed

th

roug

hout

the

orga

niza

tion.

Mai

ntai

ning

the

high

est

stan

dard

s of

inte

grity

invo

lves

bei

ng h

ones

t and

do

ing

the

right

thin

g fo

r our

cus

tom

ers,

our

fello

w

empl

oyee

s, o

ur s

hare

hold

ers

and

all o

ur p

artn

ers.

To

para

phra

se J.

P. M

orga

n, Jr

., w

e w

ill c

ondu

ct fi

rst-c

lass

bu

sine

ss in

a fi

rst-c

lass

way

.

12.

We

face

fact

s

W

e m

ust b

uild

a c

ultu

re b

ased

on

trut

h, k

now

ledg

e,

cons

truc

tive

deba

te, a

pas

sion

to s

ucce

ed, a

nd

the

cour

age

to fa

ce a

nd fi

x m

ista

kes.

We

mus

t be

brut

ally

hon

est w

ith o

urse

lves

. Fro

m e

xper

ienc

e,

we

know

peo

ple

will

tell

you

the

trut

h ab

out w

hat

need

s to

be

done

— if

you

ask

them

. We

wan

t to

be

a co

mpa

ny th

at p

rom

otes

this

kin

d of

con

stru

ctiv

e ex

chan

ge. T

hen

— a

nd w

e be

lieve

this

is th

e ha

rdes

t pa

rt o

f lea

ders

hip

— w

e m

ust h

ave

the

fort

itude

an

d co

urag

e to

take

act

ion

and

do th

e rig

ht th

ing,

ho

wev

er d

ifficu

lt. L

eade

rshi

p is

an

hono

r and

a

priv

ilege

and

com

es w

ith a

resp

onsi

bilit

y to

set

the

right

exa

mpl

e. A

ll ou

r peo

ple

mus

t be

enga

ged

in

chal

leng

ing

the

syst

em a

nd s

olvi

ng p

robl

ems.

The

ke

ys a

re n

ever

to s

top

lear

ning

, to

shar

e id

eas,

and

to

alw

ays

ackn

owle

dge

and

lear

n fr

om m

ista

kes.

Our

co

mm

itmen

t is

to c

reat

e a

self-

sust

aini

ng c

ultu

re th

at

striv

es fo

r con

tinua

l im

prov

emen

t, w

hich

will

ens

ure

the

heal

th o

f thi

s co

mpa

ny fo

r dec

ades

to c

ome.

In

a c

old-

bloo

ded,

hon

est w

ay, l

eade

rs e

mph

asiz

e th

e ne

gativ

es a

t man

agem

ent m

eetin

gs a

nd fo

cus

on w

hat c

an b

e im

prov

ed (o

f cou

rse,

it’s

okay

to

cele

brat

e th

e su

cces

ses,

too)

. All

repo

rtin

g m

ust b

e ac

cura

te, a

nd a

ll re

leva

nt fa

cts

mus

t be

repo

rted

and

fu

lly d

iscl

osed

usi

ng o

ne s

et o

f boo

ks.

13.

We

have

fort

itud

e

Fo

rtitu

de o

ften

is m

issi

ng in

lead

ers:

The

y ne

ed

to h

ave

a fie

rce

reso

lve

to a

ct. I

t mea

ns d

rivi

ng

chan

ge, fi

ghtin

g bu

reau

crac

y an

d po

litic

s, a

nd ta

king

ow

ners

hip

and

resp

onsi

bilit

y.

14. W

e fo

ster

an

envi

ronm

ent o

f res

pect

, in

clus

iven

ess,

hum

anit

y an

d hu

mili

ty

Th

e be

st le

ader

s tr

eat a

ll pe

ople

pro

perl

y an

d re

spec

tful

ly, f

rom

cle

rks

to C

EOs.

We

need

to h

elp

each

oth

er b

ecau

se o

ur c

olle

ctiv

e pu

rpos

e is

to s

erve

cl

ient

s. W

hen

stro

ng le

ader

s co

nsid

er p

rom

otio

ns,

they

pic

k pe

ople

who

are

res

pect

ed. A

nd le

ader

s al

so s

houl

d as

k th

emse

lves

: Wou

ld I

wan

t to

wor

k fo

r hi

m?

Wou

ld I

wan

t my

son

or d

augh

ter

to r

epor

t to

her

? Le

ader

s ne

ed to

ack

now

ledg

e th

ose

who

se

rved

bef

ore

them

and

hel

ped

shap

e th

e en

terp

rise

—

it’s

not

one

lead

er’s

ow

n do

ing.

The

re’s

a lo

t of

luck

invo

lved

in a

nyon

e’s

succ

ess,

and

hum

ility

and

gr

atitu

de a

re im

port

ant.

15.

We

help

str

engt

hen

the

com

mun

itie

s in

w

hich

we

live

and

wor

k

W

e be

lieve

that

bui

ldin

g a

stro

ng, v

ibra

nt c

ompa

ny

— o

ne th

at s

tand

s th

e te

st o

f tim

e —

eve

ntua

lly w

ill

bene

fit n

ot o

nly

our s

hare

hold

ers

but a

lso

ever

yone

we

touc

h. It

is w

hat e

nabl

es u

s to

giv

e ba

ck to

our

com

mu-

nitie

s. In

one

sen

se, w

e vi

ew o

urse

lves

as

a sm

all

busi

ness

. If w

e w

ere

the

neig

hbor

hood

sto

re, w

e w

ould

cr

eate

sum

mer

jobs

, spo

nsor

loca

l spo

rts

team

s an

d su

ppor

t nea

rby

orga

niza

tions

. We

oper

ate

this

way

in

man

y of

our

com

mun

ities

aro

und

the

wor

ld, c

omm

itted

to

add

ing

valu

e by

focu

sing

on

issu

es th

at a

re u

nive

r-sa

lly im

port

ant,

incl

udin

g ed

ucat

ion

and

com

mun

ity

deve

lopm

ent.

Our g

reat

est s

ourc

e of

prid

e, h

owev

er, i

s ou

r em

ploy

ees

who

con

trib

ute

trem

endo

us a

mou

nts

of

time

and

tale

nt to

wor

thw

hile

cau

ses

arou

nd th

e gl

obe.

Ou

r lon

g tr

aditi

on o

f vol

unte

eris

m c

ontin

ues

with

th

ousa

nds

of e

mpl

oyee

s pa

rtic

ipat

ing

in h

undr

eds

of

volu

ntee

r effo

rts.

A C

OM

MIT

MEN

T TO

INTE

GR

ITY,

FA

IRN

ESS

AN

D R

ESP

ON

SIB

ILIT

Y

HO

W W

E D

O B

USI

NES

S —

APP

END

IX93

16. W

e hi

re, t

rain

and

ret

ain

grea

t, d

iver

se

empl

oyee

s

We

need

to r

emin

d ou

rsel

ves

that

the

mos

t im

port

ant t

hing

we

can

do fo

r em

ploy

ees

is to

bui

ld

a he

alth

y, v

ibra

nt c

ompa

ny th

at tr

eats

peo

ple

with

re

spec

t and

cre

ates

opp

ortu

nitie

s. E

very

per

son

coun

ts, a

nd w

e al

l sup

port

one

ano

ther

. We

mus

t do

wha

t is

righ

t for

the

com

pany

and

for

the

cust

omer

ev

en if

we

have

to m

ake

unpo

pula

r de

cisi

ons

or

forg

o ne

ar-t

erm

rew

ards

. We

stri

ve to

bui

ld a

n in

clus

ive

wor

k en

viro

nmen

t tha

t dra

ws

on a

nd

deve

lops

the

best

tale

nt. W

e w

ant i

ndiv

idua

ls o

f any

ra

ce, f

aith

, nat

iona

lity,

gen

der,

sexu

al o

rien

tatio

n or

phy

sica

l abi

lity

to h

ave

the

oppo

rtun

ity to

exc

el

base

d on

thei

r pe

rfor

man

ce a

nd c

ontr

ibut

ion

to th

e co

mpa

ny. B

uild

ing

a di

vers

e an

d in

clus

ive

wor

k en

vi-

ronm

ent r

equi

res

effor

t and

per

seve

ranc

e, w

hich

is

why

we

will

mak

e in

clus

iven

ess

and

dive

rsity

an

inte

gral

par

t of h

ow w

e m

anag

e th

e co

mpa

ny.

17.

We

build

team

wor

k, lo

yalt

y an

d m

oral

e

We

need

to c

ontin

ually

hire

and

trai

n a

pool

of d

iver

se

man

ager

s an

d st

rong

lead

ers.

Gre

at m

anag

ers

driv

e fo

r sup

erio

r per

form

ance

, bui

ldin

g te

amw

ork

with

in

and

acro

ss b

usin

ess

lines

. Suc

cess

ful l

eade

rs d

emon

-st

rate

a p

assi

on to

win

by

actin

g qu

ickl

y on

toug

h is

sues

, rel

entle

ssly

str

ivin

g to

impr

ove

perf

orm

ance

an

d de

velo

ping

peo

ple.

We

know

that

loya

lty a

nd m

utua

l res

pect

are

a

two-

way

str

eet.

Loya

lty s

houl

d be

to th

e pr

inci

ples

for

whi

ch s

omeo

ne s

tand

s an

d to

the

inst

itutio

n. W

hen

mis

used

, loy

alty

to a

n in

divi

dual

is a

noth

er fo

rm o

f cr

onyi

sm. S

imila

rly, l

oyal

ty to

em

ploy

ees

does

not

m

ean

that

man

ager

s ow

e an

y pe

rson

a p

artic

ular

job.

It

mea

ns b

uild

ing

a he

alth

y, v

ibra

nt c

ompa

ny b

y te

lling

em

ploy

ees

the

trut

h an

d gi

ving

them

mea

ning

ful

wor

k, tr

aini

ng a

nd o

ppor

tuni

ties.

If e

mpl

oyee

s fa

ll do

wn,

then

we

shou

ld g

et th

em th

e he

lp th

ey n

eed.

M

erito

crac

y an

d te

amw

ork

are

criti

cal,

but t

hey

also

fr

eque

ntly

are

mis

unde

rsto

od. M

erito

crac

y m

eans

pu

ttin

g th

e be

st p

erso

n in

the

job,

whi

ch p

rom

otes

a

sens

e of

just

ice

in th

e or

gani

zatio

n ra

ther

than

the

appe

aran

ce o

f cyn

icis

m: “

Here

they

go

agai

n, ta

king

ca

re o

f the

ir fr

iend

s.”

H

igh

mor

ale

is d

evel

oped

thro

ugh

fixin

g pr

oble

ms,

de

alin

g di

rect

ly a

nd h

ones

tly w

ith is

sues

, ear

ning

re

spec

t and

win

ning

. It d

oes

not c

ome

from

ove

r-pa

ying

peo

ple

or d

eliv

erin

g sw

eet t

alk,

whi

ch a

void

s ha

rd d

ecis

ion

mak

ing

and

fost

ers

pass

ive-

aggr

essi

ve

beha

vior

. Fin

ally

, whi

le te

amw

ork

is im

port

ant a

nd

ofte

n co

de fo

r “g

ettin

g al

ong,

” eq

ually

impo

rtan

t is

an in

divi

dual

’s a

bilit

y to

hav

e th

e co

urag

e to

sta

nd

alon

e an

d do

the

righ

t thi

ng w

hen

need

ed.

A G

REA

T TE

AM

AN

D W

INN

ING

CU

LTU

RE

HO

W W

E D

O B

USI

NES

S —

APP

END

IX94

18. W

e m

aint

ain

an o

pen,

ent

repr

eneu

rial

m

erit

ocra

cy fo

r al

l

W

e ne

ed to

mak

e in

nova

tion

part

of o

ur D

NA.

Thi

s do

es n

ot m

ean

spen

ding

hun

dred

s of

mill

ions

of

dolla

rs o

n fa

iled

idea

s. It

doe

s m

ean,

how

ever

, tha

t w

e w

ill ta

ke c

alcu

late

d ri

sks,

kno

win

g th

at s

ome

will

fa

il. It

requ

ires

that

we

build

forw

ard-

look

ing

idea

s in

to e

very

con

vers

atio

n, e

very

ana

lysi

s an

d ev

ery

new

st

rate

gy w

e co

nsid

er.

19.

We

com

mun

icat

e ho

nest

ly, c

lear

ly a

nd

cons

iste

ntly

Sh

arin

g in

form

atio

n al

l the

tim

e is

vita

l — w

e sh

ould

de

bate

the

issu

es a

nd a

ltern

ativ

e ap

proa

ches

, not

th

e fa

cts.

The

bes

t lea

ders

kill

bur

eauc

racy

and

w

atch

for

tellt

ale

sign

s of

pol

itics

, suc

h as

sid

ebar

m

eetin

gs a

fter

the

othe

r m

eetin

gs b

ecau

se p

eopl

e di

dn’t

spea

k th

eir

min

d at

the

righ

t tim

e. It

’s e

qual

ly

impo

rtan

t for

lead

ers

to g

et o

ut o

f the

offi

ce

regu

larl

y to

sta

y fo

cuse

d on

wha

t’s h

appe

ning

in th

e fie

ld. A

nyon

e in

a m

eetin

g sh

ould

feel

free

to s

peak

hi

s or

her

min

d w

ithou

t fea

r of

offe

ndin

g an

yone

el

se. S

omeo

ne o

nce

desc

ribe

d th

e im

port

ance

of

havi

ng “

at le

ast o

ne tr

uth-

telle

r at

the

tabl

e.”

Wel

l, if

ther

e is

just

one

trut

h-te

ller

at th

e ta

ble,

a b

usin

ess

is in

trou

ble

— e

very

one

shou

ld b

e a

trut

h-te

ller.

20. W

e st

rive

to b

e go

od le

ader

s

Tr

ue le

ader

s m

ust s

et th

e hi

ghes

t sta

ndar

ds o

f in

tegr

ity. S

uch

stan

dard

s de

man

d th

at w

e tr

eat

cust

omer

s an

d em

ploy

ees

the

way

we

wou

ld w

ant

to b

e tr

eate

d ou

rsel

ves

or th

e w

ay w

e w

ould

wan

t ou

r ow

n m

othe

r to

be

trea

ted.

With

out t

he c

apac

ity

to in

nova

te, r

espo

nd to

new

and

rapi

dly

chan

ging

m

arke

ts, a

nd a

ntic

ipat

e en

orm

ous

chal

leng

es, l

arge

co

mpa

nies

like

our

s w

ould

cea

se to

exi

st. T

he p

eopl

e w

ho h

elp

us a

chie

ve th

ese

obje

ctiv

es a

re a

s cr

itica

l to

the

ongo

ing

grow

th o

f our

org

aniz

atio

n as

they

wou

ld

be to

the

laun

ch o

f a s

ucce

ssfu

l sta

rtup

com

pany

. Go

od p

eopl

e w

ant t

o w

ork

for

good

lead

ers.

But

bad

le

ader

s ar

e co

rros

ive

to a

n or

gani

zatio

n an

d ca

n dr

ive

out a

lmos

t any

one

who

’s go

od. I

t oft

en is

a c

halle

nge

to fi

nd th

e ba

d le

ader

s an

d ro

ot th

em o

ut s

ince

man

y ar

e m

anip

ulat

ive

and

dece

ptiv

e. M

ost l

eade

rs I

know

ar

e w

orki

ng to

bui

ld s

omet

hing

of w

hich

they

can

be

prou

d. T

hey

usua

lly w

ork

hard

— n

ot b

ecau

se th

ey

mus

t but

bec

ause

they

wan

t to

do s

o. T

hey

set h

igh

stan

dard

s be

caus

e if

they

are

goi

ng to

do

som

ethi

ng,

they

wan

t to

do it

to th

e be

st o

f the

ir a

bilit

y. T

hey

belie

ve in

thin

gs la

rger

than

them

selv

es, a

nd th

e hi

ghes

t obl

igat

ion

is to

the

team

or

the

orga

niza

tion.

Le

ader

s de

man

d lo

yalty

, not

to th

emse

lves

but

to

the

caus

e fo

r w

hich

they

sta

nd. A

t our

com

pany

and

at

man

y of

the

best

com

pani

es th

roug

hout

his

tory

, th

e co

ntin

ual c

reat

ion

of g

ood

lead

ers

is w

hat h

as

enab

led

the

orga

niza

tion

to s

tand

the

true

test

of

grea

tnes

s —

the

test

of t

ime.

HO

W W

E D

O B

USI

NES

S —

APP

END

IX95

BU

SIN

ESS

PRAC

TICE

S

(htt

p://

ww

w.jp

mor

ganc

hase

.com

/cor

pora

te/

Abou

t-JPM

C/do

cum

ent/

2014

0711

_Web

site

_PDF

_FIN

AL.p

df)

(htt

p://

ww

w.jp

mor

ganc

hase

.com

/cor

pora

te/

Abou

t-JPM

C/do

cum

ent/

FIN

AL-2

014C

odeo

fCon

duct

.pdf

)

(htt

p://

ww

w.jp

mor

ganc

hase

.com

/cor

pora

te/

Abou

t-JPM

C/co

de-o

f-eth

ics.

htm

)

(htt

p://

ww

w.jp

mor

ganc

hase

.com

/cor

pora

te/

Abou

t-JPM

C/su

pplie

r-re

latio

ns.h

tm)

(htt

p://

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©20

14 JP

Mor

gan

Chas

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Co. A

ll ri

ghts

rese

rved

.De

cem

ber

2014

FISMA & OMB Memorandum M-07-16 · 2016-03-14 · Response of the Office of Chief Counsel...

Documents

Transcript of FISMA & OMB Memorandum M-07-16 · 2016-03-14 · Response of the Office of Chief Counsel...

***FISMA & OMB Memorandum M-07-16*** · 2016-03-14 · Response of the Office of Chief Counsel...

Documents

Transcript of ***FISMA & OMB Memorandum M-07-16*** · 2016-03-14 · Response of the Office of Chief Counsel...

FISMA & OMB Memorandum M-07-16 · 2016-03-14 · Response of the Office of Chief Counsel...

Transcript of FISMA & OMB Memorandum M-07-16 · 2016-03-14 · Response of the Office of Chief Counsel...