The information in this preliminary
pricing supplement is not complete and may be changed. This preliminary pricing supplement is not an offer to sell nor does it
seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Subject to completion dated March
24, 2017
March ,
2017
|
Registration Statement Nos. 333-209682 and 333-209682-01; Rule 424(b)(2)
|
JPMorgan Chase Financial Company LLC
Structured Investments
Auto Callable Contingent Interest Notes Linked
to the Least Performing of the Common Stock of Bank of America Corporation, the Common Stock of Citigroup Inc. and the Common Stock
of Wells Fargo & Company due October 4, 2018
Fully and Unconditionally Guaranteed by JPMorgan
Chase & Co.
|
·
|
The notes are designed for investors who seek a Contingent Interest Payment with respect to each Review Date for which the
closing price of one share of each of the Reference Stocks is greater than or equal to 65.00% of its Initial Value, which we refer
to as an Interest Barrier.
|
|
·
|
If the closing price of one share of each Reference Stock is greater than or equal to its Interest Barrier on any Review Date,
investors will receive, in addition to the Contingent Interest Payment with respect to that Review Date, any previously unpaid
Contingent Interest Payments for prior Review Dates.
|
|
·
|
The notes will be automatically called if the closing price of one share of each Reference Stock on any Review Date (other
than the first and final Review Dates) is greater than or equal to its Initial Value.
|
|
·
|
The earliest date on which an automatic call may be initiated is September 29, 2017.
|
|
·
|
Investors in the notes should be willing to accept the risk of losing some or all of their principal and the risk that no Contingent
Interest Payment may be made with respect to some or all Review Dates.
|
|
·
|
Investors should also be willing to forgo fixed interest and dividend payments, in exchange for the opportunity to receive
Contingent Interest Payments.
|
|
·
|
The notes are unsecured and unsubordinated obligations of JPMorgan Chase Financial Company LLC, which we refer to as JPMorgan
Financial, the payment on which is fully and unconditionally guaranteed by JPMorgan Chase & Co.
Any payment on the notes
is subject to the credit risk of JPMorgan Financial, as issuer of the notes, and the credit risk of JPMorgan Chase & Co., as
guarantor of the notes.
|
|
·
|
Payments on the notes are not linked to a basket composed of the Reference Stocks. Payments on the notes are linked to the
performance of each of the Reference Stocks individually, as described below.
|
|
·
|
Minimum denominations of $1,000 and integral multiples thereof
|
|
·
|
The notes are expected to price on or about March 29, 2017 and are expected to settle on or about April 3, 2017.
|
Investing in the notes involves a number of risks. See “Risk
Factors” beginning on page PS-10 of the accompanying product supplement and “Selected Risk Considerations” beginning
on page PS-5 of this pricing supplement.
Neither the Securities and Exchange Commission (the “SEC”)
nor any state securities commission has approved or disapproved of the notes or passed upon the accuracy or the adequacy of this
pricing supplement or the accompanying product supplement, prospectus supplement and prospectus. Any representation to the contrary
is a criminal offense.
|
Price to Public (1)
|
Fees and Commissions (2)
|
Proceeds to Issuer
|
Per note
|
$1,000
|
$
|
$
|
Total
|
$
|
$
|
$
|
(1) See “Supplemental Use of Proceeds”
in this pricing supplement for information about the components of the price to public of the notes.
(2) J.P. Morgan Securities LLC, which we refer to
as JPMS, acting as agent for JPMorgan Financial, will pay all of the selling commissions it receives from us to other affiliated
or unaffiliated dealers. In no event will these selling commissions exceed $17.50 per $1,000 principal amount note. See “Plan
of Distribution (Conflicts of Interest)” in the accompanying product supplement.
|
If the notes priced today, the estimated value of the notes would
be approximately $961.30 per $1,000 principal amount note. The estimated value of the notes, when the terms of the notes are set,
will be provided in the pricing supplement and will not be less than $950.00 per $1,000 principal amount note. See “The Estimated
Value of the Notes” in this pricing supplement for additional information.
The notes are not bank deposits, are not insured by the Federal
Deposit Insurance Corporation or any other governmental agency and are not obligations of, or guaranteed by, a bank.
Pricing supplement to product supplement no.
4-I dated April 15, 2016
and the prospectus and prospectus supplement, each dated April 15, 2016
Key
Terms
Issuer:
JPMorgan Chase Financial Company LLC
Guarantor:
JPMorgan Chase & Co.
Reference
Stocks:
As specified under “Key Terms Relating to the Reference Stocks”
in this pricing supplement
Contingent
Interest
Payments:
If the notes have not been automatically called and the closing price of one share of each Reference Stock on any Review
Date is greater than or equal to its Interest Barrier, you will receive on the applicable Interest Payment Date for each $1,000
principal amount note a Contingent Interest Payment equal to at least $22.50 (equivalent to a Contingent Interest Rate of at least
9.00% per annum, payable at a rate of at least 2.25% per quarter) (to be provided in the pricing supplement),
plus
any previously
unpaid Contingent Interest Payments for any prior Review Dates.
If the Contingent Interest Payment is not paid on any Interest
Payment Date, that unpaid Contingent Interest Payment will be paid on a later Interest Payment Date if the closing price of one
share of each Reference Stock on the Review Date related to that later Interest Payment Date is greater than or equal to its Interest
Barrier. You will not receive any unpaid Contingent Interest Payments if the closing price of one share of any Reference Stock
on each subsequent Review Date is less than its Interest Barrier.
Contingent
Interest
Rate:
At least 9.00% per annum, payable at a rate of at least 2.25% per quarter (to be provided in the pricing supplement)
Interest Barrier / Trigger Value:
With respect to each Reference Stock, 65.00% of its Initial Value, as specified under “Key Terms Relating to the Reference
Stocks” in this pricing supplement.
Pricing
Date:
On or about March 29, 2017
Original
Issue Date (Settlement Date):
On or about April 3, 2017
Review
Dates*:
June 29, 2017, September 29, 2017, December 29, 2017, March 29, 2018, June 29, 2018 and October 1, 2018 (final
Review Date)
Interest
Payment Dates*:
July 5, 2017, October 4, 2017, January 4, 2018, April 4, 2018, July 5, 2018 and the Maturity Date
Maturity
Date*:
October 4, 2018
Call Settlement Date*:
If the notes are automatically called on any Review Date (other than the first and final Review Dates), the first Interest
Payment Date immediately following that Review Date
* Subject to postponement in the event of a market disruption
event and as described under “General Terms of Notes — Postponement of a Determination Date — Notes Linked to
Multiple Underlyings” and “General Terms of Notes — Postponement of a Payment Date” in the accompanying
product supplement
|
Automatic Call:
If the closing price of one share of each Reference Stock on
any Review Date (other than the first and final Review Dates) is greater than or equal to its Initial Value, the notes will be
automatically called for a cash payment, for each $1,000 principal amount note, equal to (a) $1,000
plus
(b) the Contingent
Interest Payment applicable to that Review Date
plus
(c) any previously unpaid Contingent Interest Payments for any prior
Review Dates, payable on the applicable Call Settlement Date. No further payments will be made on the notes.
Payment at Maturity:
If the notes have not been automatically called and the Final
Value of each Reference Stock is greater than or equal to its Trigger Value, you will receive a cash payment at maturity, for each
$1,000 principal amount note, equal to (a) $1,000
plus
(b) the Contingent Interest Payment applicable to the final Review
Date
plus
(c) any previously unpaid Contingent Interest Payments for any prior Review Dates.
If the notes have not been automatically called and the Final
Value of any Reference Stock is less than its Trigger Value, your payment at maturity per $1,000 principal amount note will be
calculated as follows:
$1,000 + ($1,000 × Least Performing
Stock Return)
If the notes have not been automatically called and the Final
Value of any Reference Stock is less than its Trigger Value, you will lose more than 35.00% of your principal amount at maturity
and could lose all of your principal amount at maturity.
Least Performing Reference Stock:
The Reference Stock with the Least Performing Stock Return
Least Performing Stock Return:
The lowest of the Stock Returns of the Reference Stocks
Stock Return:
With respect to each Reference Stock,
(Final Value – Initial Value)
Initial Value
Initial
Value:
With respect to each Reference Stock
, t
he
closing price of one share of that Reference Stock on the Pricing Date, as specified under “Key Terms Relating to the Reference
Stocks” in this pricing supplement.
Final
Value:
With respect to each Reference Stock, the closing price of one share of that
Reference Stock on the final Review Date
Stock
Adjustment Factor:
With respect to each Reference Stock, the Stock Adjustment Factor is referenced in determining the
closing price of one share of that Reference Stock and is set equal to 1.0 on the Pricing Date. The Stock Adjustment Factor of
each Reference Stock is subject to adjustment upon the occurrence of certain corporate events affecting that Reference Stock. See
“The Underlyings — Reference Stocks — Anti-Dilution Adjustments” and “The Underlyings — Reference
Stocks — Reorganization Events” in the accompanying product supplement for further information.
|
PS-
1
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Least Performing of
the Common Stock of Bank of America Corporation, the Common Stock of
Citigroup Inc. and the Common Stock of Wells Fargo & Company
|
|
Key
Terms Relating to the Reference Stocks
Reference Stock
|
Bloomberg Ticker Symbol
|
Initial Value
|
Interest Barrier / Trigger Value
|
Common stock of Bank of America Corporation, par value
$0.01 per share
|
BAC
|
$
|
$
|
Common stock of Citigroup Inc., par value $0.01
per share
|
C
|
$
|
$
|
Common stock of Wells Fargo & Company, par value $
1 2/3 per share
|
WFC
|
$
|
$
|
How
the Notes Work
Payment
in Connection with the First Review Date
Payments
in Connection with Review Dates (Other than the First and Final Review Dates)
PS-
2
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Least Performing of
the Common Stock of Bank of America Corporation, the Common Stock of
Citigroup Inc. and the Common Stock of Wells Fargo & Company
|
|
Payment
at Maturity If the Notes Have Not Been Automatically Called
Total
Contingent Interest Payments
The table below illustrates the hypothetical total
Contingent Interest Payments per $1,000 principal amount note over the term of the notes based on a hypothetical Contingent Interest
Rate of 9.00% per annum, depending on how many Contingent Interest Payments are made prior to automatic call or maturity. The actual
Contingent Interest Rate will be provided in the pricing supplement and will be at least 9.00% per annum.
Number of Contingent Interest
Payments
|
Total Contingent Interest
Payments
|
6
|
$135.00
|
5
|
$112.50
|
4
|
$90.00
|
3
|
$67.50
|
2
|
$
45.00
|
1
|
$
22.50
|
0
|
$
0.00
|
Hypothetical
Payout Examples
The following examples illustrate payments on
the notes linked to three hypothetical Reference Stocks, assuming a range of performances for the hypothetical Least Performing
Reference Stock on the Review Dates.
Each hypothetical payment set forth below assumes that the closing price of one share of
each Reference Stock that is not the Least Performing Reference Stock on each Review Date is greater than or equal to its Initial
Value (and therefore its Interest Barrier and Trigger Value).
In addition, the hypothetical payments set forth
below assume the following:
|
·
|
an Initial Value for the Least Performing Reference Stock of $100.00;
|
|
·
|
an Interest Barrier and a Trigger Value for the Least Performing Reference Stock of $65.00 (equal to 65.00% of its hypothetical
Initial Value); and
|
|
·
|
a Contingent Interest Rate of 9.00% per annum (payable at a rate of 2.25% per quarter).
|
The hypothetical Initial Value of the Least
Performing Reference Stock of $100.00 has been chosen for illustrative purposes only and may not represent a likely actual Initial
Value of any Reference Stock. The actual Initial Value of each Reference Stock will be the closing price of one share of that Reference
Stock on the Pricing Date and will be provided in the pricing supplement. For historical data regarding the actual closing prices
of one share of each Reference Stock, please see the historical information set forth under “The Reference Stocks”
in this pricing supplement.
PS-
3
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Least Performing of
the Common Stock of Bank of America Corporation, the Common Stock of
Citigroup Inc. and the Common Stock of Wells Fargo & Company
|
|
Each hypothetical payment set forth below is
for illustrative purposes only and may not be the actual payment applicable to a purchaser of the notes. The numbers appearing
in the following examples have been rounded for ease of analysis.
Example
1 — Notes are automatically called on the second Review Date.
Date
|
Closing Price of One Share of Least Performing Reference Stock
|
Payment (per $1,000 principal amount note)
|
First Review Date
|
$105.00
|
$22.50
|
Second Review Date
|
$115.00
|
$1,022.50
|
|
Total Payment
|
$1,045.00 (4.50% return)
|
Because the closing price of one share of each
Reference Stock on the second Review Date is greater than or equal to its Initial Value, the notes will be automatically called
for a cash payment, for each $1,000 principal amount note, of $1,022.50 (or $1,000
plus
the Contingent Interest Payment
applicable to the second Review Date), payable on the applicable Call Settlement Date. The notes are not automatically callable
before the second Review Date, even though the closing price of one share of each Reference Stock on the first Review Date is greater
than its Initial Value. When added to the Contingent Interest Payment received with respect to the prior Review Date, the total
amount paid, for each $1,000 principal amount note, is $1,045.00. No further payments will be made on the notes.
Example
2 — Notes have NOT been automatically called and the Final Value of the Least Performing Reference Stock is greater than
or equal to its Trigger Value.
Date
|
Closing Price of One Share of Least Performing Reference Stock
|
Payment (per $1,000 principal amount note)
|
First Review Date
|
$90.00
|
$22.50
|
Second Review Date
|
$85.00
|
$22.50
|
Third through Fifth Review Dates
|
Less than Interest Barrier
|
$0
|
Final Review Date
|
$70.00
|
$1,090.00
|
|
Total Payment
|
$1,135.00 (13.50% return)
|
Because the notes have not been automatically
called and the Final Value of the Least Performing Reference Stock is greater than or equal to its Trigger Value, the payment at
maturity, for each $1,000 principal amount note, will be $1,090.00 (or $1,000
plus
the Contingent Interest Payment applicable
to the final Review Date
plus
the unpaid Contingent Interest Payments for any prior Interest Review Dates). When added to
the Contingent Interest Payments received with respect to the prior Review Dates, the total amount paid, for each $1,000 principal
amount note, is $1,135.00.
Example
3 — Notes have NOT been automatically called and the Final Value of the Least Performing Reference Stock is less than its
Trigger Value
.
Date
|
Closing Price of One Share of Least Performing Reference Stock
|
Payment (per $1,000 principal amount note)
|
First Review Date
|
$40.00
|
$0
|
Second Review Date
|
$45.00
|
$0
|
Third through Fifth Review Dates
|
Less than Interest Barrier
|
$0
|
Final Review Date
|
$50.00
|
$500.00
|
|
Total Payment
|
$500.00 (-50.00% return)
|
Because the notes have not been automatically
called, the Final Value of the Least Performing Reference Stock is less than its Trigger Value and the Least Performing Stock Return
is -50.00%, the payment at maturity will be $500.00 per $1,000 principal amount note, calculated as follows:
$1,000 + [$1,000 × (-50.00%)] = $500.00
PS-
4
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Least Performing of
the Common Stock of Bank of America Corporation, the Common Stock of
Citigroup Inc. and the Common Stock of Wells Fargo & Company
|
|
The hypothetical returns and hypothetical payments
on the notes shown above apply
only if you hold the notes for their entire term or until automatically called.
These hypotheticals
do not reflect the fees or expenses that would be associated with any sale in the secondary market. If these fees and expenses
were included, the hypothetical returns and hypothetical payments shown above would likely be lower.
Selected
Risk Considerations
An investment in the notes involves significant
risks. These risks are explained in more detail in the “Risk Factors” section of the accompanying product supplement.
|
·
|
YOUR INVESTMENT IN THE NOTES MAY RESULT IN A LOSS —
|
The notes do not guarantee any return
of principal. If the notes have not been automatically called and the Final Value of any Reference Stock is less than its Trigger
Value, you will lose 1% of the principal amount of your notes for every 1% that the Final Value of the Least Performing Reference
Stock is less than its Initial Value. Accordingly, under these circumstances, you will lose more than 35.00% of your principal
amount at maturity and could lose all of your principal amount at maturity.
|
·
|
THE NOTES DO NOT GUARANTEE THE PAYMENT OF INTEREST AND MAY NOT PAY ANY INTEREST AT ALL —
|
If the notes have
not been automatically called, we will make a Contingent Interest Payment with respect to a Review Date (and we will pay you any
previously unpaid Contingent Interest Payments for any prior Review Dates) only if the closing price of one share of each Reference
Stock on that Review Date is greater than or equal to its Interest Barrier. If the closing price of one share of any Reference
Stock on that Review Date is less than its Interest Barrier, no Contingent Interest Payment will be made with respect to that Review
Date. You will not receive any unpaid Contingent Interest Payments if the closing price of one share of the Reference Stock on
each subsequent Review Date is less than its Interest Barrier. Accordingly, if the closing price of one share of any Reference
Stock on each Review Date is less than its Interest Barrier, you will not receive any interest payments over the term of the notes.
|
·
|
CREDIT RISKS OF JPMORGAN FINANCIAL AND JPMORGAN CHASE & CO. —
|
Investors are dependent on our and JPMorgan
Chase & Co.’s ability to pay all amounts due on the notes. Any actual or potential change in our or JPMorgan Chase &
Co.’s creditworthiness or credit spreads, as determined by the market for taking that credit risk, is likely to adversely
affect the value of the notes. If we and JPMorgan Chase & Co. were to default on our payment obligations, you may not receive
any amounts owed to you under the notes and you could lose your entire investment.
|
·
|
AS A FINANCE SUBSIDIARY, JPMORGAN FINANCIAL HAS NO INDEPENDENT OPERATIONS AND HAS LIMITED ASSETS —
|
As a finance subsidiary of JPMorgan Chase
& Co., we have no independent operations beyond the issuance and administration of our securities. Aside from the initial capital
contribution from JPMorgan Chase & Co., substantially all of our assets relate to obligations of our affiliates to make payments
under loans made by us or other intercompany agreements. As a result, we are dependent upon payments from our affiliates to meet
our obligations under the notes. If these affiliates do not make payments to us and we fail to make payments on the notes, you
may have to seek payment under the related guarantee by JPMorgan Chase & Co., and that guarantee will rank
pari passu
with all other unsecured and unsubordinated obligations of JPMorgan Chase & Co.
|
·
|
THE APPRECIATION POTENTIAL OF THE NOTES IS LIMITED TO THE SUM OF ANY CONTINGENT INTEREST PAYMENTS THAT MAY BE PAID OVER
THE TERM OF THE NOTES,
|
regardless of any appreciation in the
price of one share of any Reference Stock, which may be significant. You will not participate in any appreciation in the price
of one share of any Reference Stock.
We and our affiliates play a variety
of roles in connection with the notes. In performing these duties, our and JPMorgan Chase & Co.’s economic interests
are potentially adverse to your interests as an investor in the notes. It is possible that hedging or trading activities of ours
or our affiliates in connection with the notes could result in substantial returns for us or our affiliates while the value of
the notes declines. Please refer to “Risk Factors — Risks Relating to Conflicts of Interest” in the accompanying
product supplement.
|
·
|
YOU ARE EXPOSED TO THE RISK OF DECLINE IN THE PRICE OF ONE SHARE OF EACH REFERENCE STOCK —
|
Payments on the notes are not linked
to a basket composed of the Reference Stocks and are contingent upon the performance of each individual Reference Stock. Poor performance
by any of the Reference Stocks over the term of the notes may result in the notes not being automatically called on a Review Date,
may negatively affect whether you will receive a Contingent Interest
PS-
5
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Least Performing of
the Common Stock of Bank of America Corporation, the Common Stock of
Citigroup Inc. and the Common Stock of Wells Fargo & Company
|
|
Payment on any Interest Payment Date
and your payment at maturity and will not be offset or mitigated by positive performance by any other Reference Stock.
|
·
|
YOUR PAYMENT AT MATURITY WILL BE DETERMINED BY THE LEAST PERFORMING REFERENCE STOCK.
|
|
·
|
THE BENEFIT PROVIDED BY THE TRIGGER VALUE MAY TERMINATE ON THE FINAL REVIEW DATE —
|
If the Final Value of any Reference Stock
is less than its Trigger Value and the notes have not been automatically called, the benefit provided by the Trigger Value will
terminate and you will be fully exposed to any depreciation in the closing price of one share of the Least Performing Reference
Stock.
|
·
|
THE AUTOMATIC CALL FEATURE MAY FORCE A POTENTIAL EARLY EXIT —
|
If your notes are automatically called,
the term of the notes may be reduced to as short as approximately six months and you will not receive any Contingent Interest Payments
after the applicable Call Settlement Date. There is no guarantee that you would be able to reinvest the proceeds from an investment
in the notes at a comparable return and/or with a comparable interest rate for a similar level of risk. Even in cases where the
notes are called before maturity, you are not entitled to any fees and commissions described on the front cover of this pricing
supplement.
|
·
|
YOU WILL NOT RECEIVE DIVIDENDS ON ANY REFERENCE STOCK OR HAVE ANY RIGHTS WITH RESPECT TO ANY REFERENCE STOCK.
|
|
·
|
NO AFFILIATION WITH ANY REFERENCE STOCK ISSUER —
|
We have not independently verified any
of the information about any Reference Stock issuer contained in this pricing supplement. You should undertake your own investigation
into each Reference Stock and its issuer. We are not responsible for any Reference Stock issuer’s public disclosure of information,
whether contained in SEC filings or otherwise.
|
·
|
THE ANTI-DILUTION PROTECTION FOR THE REFERENCE STOCKS IS LIMITED AND MAY BE DISCRETIONARY —
|
The calculation agent will not make an
adjustment in response to all events that could affect a Reference Stock. The calculation agent may make adjustments in response
to events that are not described in the accompanying product supplement to account for any diluting or concentrative effect, but
the calculation agent is under no obligation to do so or to consider your interests as a holder of the notes in making these determinations.
|
·
|
THE RISK OF THE CLOSING PRICE OF ONE SHARE OF A REFERENCE STOCK FALLING BELOW ITS INTEREST BARRIER OR TRIGGER VALUE IS GREATER
IF THE PRICE OF ONE SHARE OF THAT REFERENCE STOCK IS VOLATILE.
|
The notes will not be listed on any securities
exchange. Accordingly, the price at which you may be able to trade your notes is likely to depend on the price, if any, at which
JPMS is willing to buy the notes. You may not be able to sell your notes. The notes are not designed to be short-term trading instruments.
Accordingly, you should be able and willing to hold your notes to maturity.
|
·
|
THE FINAL TERMS AND VALUATION OF THE NOTES WILL BE PROVIDED IN THE PRICING SUPPLEMENT —
|
You should consider your potential investment
in the notes based on the minimums for the estimated value of the notes and the Contingent Interest Rate.
|
·
|
THE ESTIMATED VALUE OF THE NOTES WILL BE LOWER THAN THE ORIGINAL ISSUE PRICE (PRICE TO PUBLIC) OF THE NOTES —
|
The estimated value of the notes is only
an estimate determined by reference to several factors. The original issue price of the notes will exceed the estimated value of
the notes because costs associated with selling, structuring and hedging the notes are included in the original issue price of
the notes. These costs include the selling commissions, the projected profits, if any, that our affiliates expect to realize for
assuming risks inherent in hedging our obligations under the notes and the estimated cost of hedging our obligations under the
notes. See “The Estimated Value of the Notes” in this pricing supplement.
|
·
|
THE ESTIMATED VALUE OF THE NOTES DOES NOT REPRESENT FUTURE VALUES OF THE NOTES AND MAY DIFFER FROM OTHERS’ ESTIMATES
—
|
See “The Estimated Value of the
Notes” in this pricing supplement.
PS-
6
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Least Performing of
the Common Stock of Bank of America Corporation, the Common Stock of
Citigroup Inc. and the Common Stock of Wells Fargo & Company
|
|
|
·
|
THE ESTIMATED VALUE OF THE NOTES IS DERIVED BY REFERENCE TO AN INTERNAL FUNDING RATE —
|
The internal funding rate used in the
determination of the estimated value of the notes is based on, among other things, our and our affiliates’ view of the funding
value of the notes as well as the higher issuance, operational and ongoing liability management costs of the notes in comparison
to those costs for the conventional fixed-rate debt of JPMorgan Chase & Co. The use of an internal funding rate and any potential
changes to that rate may have an adverse effect on the terms of the notes and any secondary market prices of the notes. See “The
Estimated Value of the Notes” in this pricing supplement.
|
·
|
THE VALUE OF THE NOTES AS PUBLISHED BY JPMS (AND WHICH MAY BE REFLECTED ON CUSTOMER ACCOUNT STATEMENTS) MAY BE HIGHER THAN
THE THEN-CURRENT ESTIMATED VALUE OF THE NOTES FOR A LIMITED TIME PERIOD —
|
We generally expect that some of the
costs included in the original issue price of the notes will be partially paid back to you in connection with any repurchases of
your notes by JPMS in an amount that will decline to zero over an initial predetermined period. See “Secondary Market Prices
of the Notes” in this pricing supplement for additional information relating to this initial period. Accordingly, the estimated
value of your notes during this initial period may be lower than the value of the notes as published by JPMS (and which may be
shown on your customer account statements).
|
·
|
SECONDARY MARKET PRICES OF THE NOTES WILL LIKELY BE LOWER THAN THE ORIGINAL ISSUE PRICE OF THE NOTES —
|
Any secondary market prices of the notes
will likely be lower than the original issue price of the notes because, among other things, secondary market prices take into
account our internal secondary market funding rates for structured debt issuances and, also, because secondary market prices (a)
exclude selling commissions and (b) may exclude projected hedging profits, if any, and estimated hedging costs that are included
in the original issue price of the notes. As a result, the price, if any, at which JPMS will be willing to buy the notes from you
in secondary market transactions, if at all, is likely to be lower than the original issue price. Any sale by you prior to the
Maturity Date could result in a substantial loss to you.
|
·
|
SECONDARY MARKET PRICES OF THE NOTES WILL BE IMPACTED BY MANY ECONOMIC AND MARKET FACTORS —
|
The secondary market price of the notes
during their term will be impacted by a number of economic and market factors, which may either offset or magnify each other, aside
from the selling commissions, projected hedging profits, if any, estimated hedging costs and the prices of the Reference Stocks.
Additionally, independent pricing vendors and/or third party broker-dealers may publish a price for the notes, which may also be
reflected on customer account statements. This price may be different (higher or lower) than the price of the notes, if any, at
which JPMS may be willing to purchase your notes in the secondary market. See “Risk Factors — Risks Relating to the
Estimated Value and Secondary Market Prices of the Notes — Secondary market prices of the notes will be impacted by many
economic and market factors” in the accompanying product supplement.
PS-
7
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Least Performing of
the Common Stock of Bank of America Corporation, the Common Stock of
Citigroup Inc. and the Common Stock of Wells Fargo & Company
|
|
The
Reference Stocks
All
information contained herein on the Reference Stocks and on the Reference Stock issuers is derived from publicly available sources,
without independent verification. Each Reference Stock is registered under the Securities Exchange Act of 1934, as amended, which
we refer to as the Exchange Act, and is listed on the exchange provided in the table below, which we refer to as the relevant
exchange for purposes of that Reference Stock in the accompanying product supplement. Information provided to or filed with the
SEC by a Reference Stock issuer pursuant to the Exchange Act can be located by reference to the SEC file number provided in the
table below, and can be accessed through www.sec.gov. We do not make any representation that these publicly available documents
are accurate or complete. We obtained the closing prices below from the Bloomberg Professional
®
service (“Bloomberg”)
without independent verification.
Reference Stock
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Bloomberg Ticker Symbol
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Relevant Exchange
|
SEC File Number
|
Closing Price on March 23, 2017
|
Common stock of Bank of America Corporation,
par value $0.01 per share
|
BAC
|
New York Stock Exchange
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001-06523
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$23.07
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Common stock of Citigroup Inc.,
par value $0.01 per share
|
C
|
New York Stock Exchange
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001-09924
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$58.05
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Common stock of Wells Fargo & Company,
par value $1 2/3 per share
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WFC
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New York Stock Exchange
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001-02979
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$55.25
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Each of the Reference Stocks is issued by a company
whose primary line of business is associated with the financial industry.
According to publicly available filings of the
relevant Reference Stock issuer with the SEC:
|
·
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Bank of America Corporation is a financial institution, serving individual consumers, small- and middle-market businesses,
institutional investors, large corporations and governments with a range of banking, investing, asset management and other financial
and risk management products and services.
|
|
·
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Citigroup Inc. is a diversified financial services holding company whose businesses provide consumers, corporations, governments
and institutions with a range of financial products and services, including consumer banking and credit, corporate and investment
banking, securities brokerage, trade and securities services and wealth management.
|
|
·
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Wells Fargo & Company is a diversified financial services company that provides retail, commercial and corporate banking
services to individuals, businesses and institutions.
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Historical Information
The following graphs set forth the historical
performance of each Reference Stock based on the weekly historical closing prices of one share of that Reference Stock from January
6, 2012 through March 17, 2017. The closing prices above and below may have been adjusted by Bloomberg for corporate actions, such
as stock splits, public offerings, mergers and acquisitions, spin-offs, delistings and bankruptcy.
The historical closing prices of one share
of each Reference Stock should not be taken as an indication of future performance, and no assurance can be given as to the closing
price of one share of any Reference Stock on the Pricing Date or any Review Date. There can be no assurance that the performance
of the Reference Stocks will result in the return of any of your principal amount or the payment of any interest.
PS-
8
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Least Performing of
the Common Stock of Bank of America Corporation, the Common Stock of
Citigroup Inc. and the Common Stock of Wells Fargo & Company
|
|
PS-
9
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Least Performing of
the Common Stock of Bank of America Corporation, the Common Stock of
Citigroup Inc. and the Common Stock of Wells Fargo & Company
|
|
Tax
Treatment
You
should review carefully the section entitled “Material U.S. Federal Income Tax Consequences” in the accompanying product
supplement no. 4-I. In determining our reporting responsibilities we intend to treat (i) the notes for U.S. federal income tax
purposes as prepaid forward contracts with associated contingent coupons and (ii) any Contingent Interest Payments as ordinary
income, as described in the section entitled “Material U.S. Federal Income Tax Consequences — Tax Consequences to
U.S. Holders — Notes Treated as Prepaid Forward Contracts with Associated Contingent Coupons” in the accompanying
product supplement. Based on the advice of Davis Polk & Wardwell LLP, our special tax counsel, we believe that this is a reasonable
treatment, but that there are other reasonable treatments that the IRS or a court may adopt, in which case the timing and character
of any income or loss on the notes could be materially affected. In addition, in 2007 Treasury and the IRS released a notice requesting
comments on the U.S. federal income tax treatment of “prepaid forward contracts” and similar instruments. The notice
focuses in particular on whether to require investors in these instruments to accrue income over the term of their investment.
It also asks for comments on a number of related topics, including the character of income or loss with respect to these instruments
and the relevance of factors such as the nature of the underlying property to which the instruments are linked. While the notice
requests comments on appropriate transition rules and effective dates, any Treasury regulations or other guidance promulgated
after consideration of these issues could materially affect the tax consequences of an investment in the notes, possibly with
retroactive effect. You should consult your tax adviser regarding the U.S. federal income tax consequences of an investment in
the notes, including possible alternative treatments and the issues presented by this notice.
Non-U.S.
Holders — Tax Considerations
. The U.S. federal income tax treatment of Contingent Interest Payments is uncertain, and
although we believe it is reasonable to take a position that Contingent Interest Payments are not subject to U.S. withholding
tax (at least if an applicable Form W-8 is provided), a withholding agent may nonetheless withhold on these payments (generally
at a rate of 30%, subject to the possible reduction of that rate under an applicable income tax treaty), unless income from your
notes is effectively connected with your conduct of a trade or business in the United States (and, if an applicable treaty so
requires, attributable to a permanent establishment in the United States). If you are not a United States person, you are urged
to consult your tax adviser regarding the U.S. federal income tax consequences of an investment in the notes in light of your
particular circumstances.
Section
871(m) of the Code and Treasury regulations promulgated thereunder (“Section 871(m)”) generally impose a 30% withholding
tax (unless an income tax treaty applies) on dividend equivalents paid or deemed paid to Non-U.S. Holders with respect to certain
financial instruments linked to U.S. equities or indices that include U.S. equities. Section 871(m) provides certain exceptions
to this withholding regime, including for instruments linked to certain broad-based indices that meet requirements set forth in
the applicable Treasury regulations (such an index, a “Qualified Index”). Additionally, the applicable regulations
exclude from the scope of Section 871(m) instruments issued in 2017 that do not have a delta of one with respect to underlying
securities that could pay U.S.-source dividends for U.S. federal income tax purposes (each an “Underlying Security”).
Based on certain determinations made by us, we expect that Section 871(m) will not apply to the notes with regard to Non-U.S.
Holders. Our determination is not binding on the IRS, and the IRS may disagree with this determination. Section 871(m) is complex
and its application may depend on your particular circumstances, including whether you enter into other transactions with respect
to an Underlying Security. If necessary, further information regarding the potential application of Section 871(m) will be provided
in the pricing supplement for the notes. You should consult your tax adviser regarding the potential application of Section 871(m)
to the notes.
FATCA
.
Withholding under legislation commonly referred to as “FATCA” could apply to payments with respect to the notes that
are treated as U.S.-source “fixed or determinable annual or periodical” income (“FDAP Income”) for U.S.
federal income tax purposes (such as interest, if the notes are recharacterized, in whole or in part, as debt instruments, or
Contingent Interest Payments if they are otherwise treated as FDAP Income). Under a recent IRS notice, withholding under FATCA
will not apply to payments of gross proceeds (other than any amount treated as FDAP Income) of a taxable disposition, including
an early redemption or redemption at maturity, of the notes. You should consult your tax adviser regarding the potential application
of FATCA to the notes.
In
the event of any withholding on the notes, we will not be required to pay any additional amounts with respect to amounts so withheld.
The Estimated Value of the Notes
The
estimated value of the notes set forth on the cover of this pricing supplement is equal to the sum of the values of the following
hypothetical components: (1) a fixed-income debt component with the same maturity as the notes, valued using the internal funding
rate described below, and (2) the derivative or derivatives underlying the economic terms of the notes. The estimated value of
the notes does not represent a minimum price at which JPMS would be willing to buy your notes in any secondary market (if any
exists) at any time. The internal funding rate used in the determination of the estimated value of the notes is based on, among
other things, our and our affiliates’ view of the funding value of the notes as well as the higher issuance, operational
and ongoing liability management costs of the notes in comparison to those costs for the conventional fixed-rate debt of JPMorgan
Chase & Co. For additional
PS-
10
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Least Performing of
the Common Stock of Bank of America Corporation, the Common Stock of
Citigroup Inc. and the Common Stock of Wells Fargo & Company
|
|
information,
see “Selected Risk Considerations — The Estimated Value of the Notes Is Derived by Reference to an Internal Funding
Rate” in this pricing supplement.
The
value of the derivative or derivatives underlying the economic terms of the notes is derived from internal pricing models of our
affiliates. These models are dependent on inputs such as the traded market prices of comparable derivative instruments and on
various other inputs, some of which are market-observable, and which can include volatility, dividend rates, interest rates and
other factors, as well as assumptions about future market events and/or environments. Accordingly, the estimated value of the
notes is determined when the terms of the notes are set based on market conditions and other relevant factors and assumptions
existing at that time.
The
estimated value of the notes does not represent future values of the notes and may differ from others’ estimates. Different
pricing models and assumptions could provide valuations for the notes that are greater than or less than the estimated value of
the notes. In addition, market conditions and other relevant factors in the future may change, and any assumptions may prove to
be incorrect. On future dates, the value of the notes could change significantly based on, among other things, changes in market
conditions, our or JPMorgan Chase & Co.’s creditworthiness, interest rate movements and other relevant factors, which
may impact the price, if any, at which JPMS would be willing to buy notes from you in secondary market transactions.
The
estimated value of the notes will be lower than the original issue price of the notes because costs associated with selling, structuring
and hedging the notes are included in the original issue price of the notes. These costs include the selling commissions paid
to JPMS and other affiliated or unaffiliated dealers, the projected profits, if any, that our affiliates expect to realize for
assuming risks inherent in hedging our obligations under the notes and the estimated cost of hedging our obligations under the
notes. Because hedging our obligations entails risk and may be influenced by market forces beyond our control, this hedging may
result in a profit that is more or less than expected, or it may result in a loss. A portion of the profits, if any, realized
in hedging our obligations under the notes may be allowed to other affiliated or unaffiliated dealers, and we or one or more of
our affiliates will retain any remaining hedging profits. See “Selected Risk Considerations — The Estimated Value
of the Notes Will Be Lower Than the Original Issue Price (Price to Public) of the Notes” in this pricing supplement.
Secondary
Market Prices of the Notes
For
information about factors that will impact any secondary market prices of the notes, see “Risk Factors — Risks Relating
to the Estimated Value and Secondary Market Prices of the Notes — Secondary market prices of the notes will be impacted
by many economic and market factors” in the accompanying product supplement. In addition, we generally expect that some
of the costs included in the original issue price of the notes will be partially paid back to you in connection with any repurchases
of your notes by JPMS in an amount that will decline to zero over an initial predetermined period. These costs can include projected
hedging profits, if any, and, in some circumstances, estimated hedging costs and our internal secondary market funding rates for
structured debt issuances. This initial predetermined time period is intended to be the shorter of six months and one-half of
the stated term of the notes. The length of any such initial period reflects the structure of the notes, whether our affiliates
expect to earn a profit in connection with our hedging activities, the estimated costs of hedging the notes and when these costs
are incurred, as determined by our affiliates. See “Selected Risk Considerations — The Value of the Notes as Published
by JPMS (and Which May Be Reflected on Customer Account Statements) May Be Higher Than the Then-Current Estimated Value of the
Notes for a Limited Time Period” in this pricing supplement.
Supplemental
Use of Proceeds
The
notes are offered to meet investor demand for products that reflect the risk-return profile and market exposure provided by the
notes. See “How the Notes Work” and “Hypothetical Payout Examples” in this pricing supplement for an illustration
of the risk-return profile of the notes and “The Reference Stocks” in this pricing supplement for a description of
the market exposure provided by the notes.
The
original issue price of the notes is equal to the estimated value of the notes plus the selling commissions paid to JPMS and other
affiliated or unaffiliated dealers, plus (minus) the projected profits (losses) that our affiliates expect to realize for assuming
risks inherent in hedging our obligations under the notes, plus the estimated cost of hedging our obligations under the notes.
Additional
Terms Specific to the Notes
You
may revoke your offer to purchase the notes at any time prior to the time at which we accept such offer by notifying the applicable
agent. We reserve the right to change the terms of, or reject any offer to purchase, the notes prior to their issuance. In the
event of any changes to the terms of the notes, we will notify you and you will be asked to accept such changes in connection
with your purchase. You may also choose to reject such changes, in which case we may reject your offer to purchase.
PS-
11
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Least Performing of
the Common Stock of Bank of America Corporation, the Common Stock of
Citigroup Inc. and the Common Stock of Wells Fargo & Company
|
|
You
should read this pricing supplement together with the accompanying prospectus, as supplemented by the accompanying prospectus
supplement relating to our Series A medium-term notes of which these notes are a part, and the more detailed information contained
in the accompanying product supplement. This pricing supplement, together with the documents listed below, contains the terms
of the notes and supersedes all other prior or contemporaneous oral statements as well as any other written materials including
preliminary or indicative pricing terms, correspondence, trade ideas, structures for implementation, sample structures, fact sheets,
brochures or other educational materials of ours. You should carefully consider, among other things, the matters set forth in
the “Risk Factors” section of the accompanying product supplement, as the notes involve risks not associated with
conventional debt securities. We urge you to consult your investment, legal, tax, accounting and other advisers before you invest
in the notes.
You
may access these documents on the SEC website at www.sec.gov as follows (or if such address has changed, by reviewing our filings
for the relevant date on the SEC website):
Our
Central Index Key, or CIK, on the SEC website is 1665650, and JPMorgan Chase & Co.’s CIK is 19617. As used in this pricing
supplement, “we,” “us” and “our” refer to JPMorgan Financial.
PS-
12
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Least Performing of
the Common Stock of Bank of America Corporation, the Common Stock of
Citigroup Inc. and the Common Stock of Wells Fargo & Company
|
|
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