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 November
12, 2019
November , 2019
|
Registration Statement
Nos. 333-222672 and 333-222672-01; Rule424(b)(2)
|
JPMorgan Chase Financial Company LLC
Structured Investments
Auto Callable Yield Notes Linked to the Least
Performing of the NASDAQ-100 Index®, the Russell 2000® Index and the S&P 500®
Index due December 1, 2020
Fully
and Unconditionally Guaranteed by JPMorgan Chase & Co.
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●
|
The notes are designed for investors who seek a higher interest rate than the yield on a conventional debt security with the
same maturity issued by us.
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●
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The notes will be automatically called if the closing level of each Index on any Review Date (other than the final Review Date)
is greater than or equal to its Initial Value.
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The earliest date on which an automatic call may be initiated is May 26, 2020.
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Investors in the notes should be willing to accept the risk of losing some or all of their principal and be willing to forgo
dividend payments, in exchange for Interest Payments. Investors should be willing to assume the risk that they will receive less
interest if the notes are automatically redeemed and the risk that, if the notes are not automatically redeemed, they may lose
some or all of their principal at maturity.
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●
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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.
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●
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Payments on the notes are not linked to a basket composed of the Indices. Payments on the notes are linked to the performance
of each of the Indices individually, as described below.
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Minimum denominations of $1,000 and integral multiples thereof
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The notes are expected to price on or about November 25, 2019 and are expected to settle on or about November 29, 2019.
|
Investing in the notes involves a number of risks.
See “Risk Factors” beginning on page PS-10 of the accompanying product supplement, “Risk Factors” beginning
on page US-1 of the accompanying underlying 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, underlying 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 $5.00 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 $985.60 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 $970.00 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 5, 2018, underlying supplement no. 1-I dated April 5, 2018 and the prospectus and prospectus supplement, each dated
April 5, 2018
Key Terms
Issuer: JPMorgan
Chase Financial Company LLC, an indirect, wholly owned finance subsidiary of JPMorgan Chase & Co.
Guarantor: JPMorgan
Chase & Co.
Indices: The
NASDAQ-100 Index® (Bloomberg
ticker: NDX), the Russell 2000® Index
(Bloomberg ticker: RTY) and the S&P 500® Index
(Bloomberg ticker: SPX) (each an “Index” and collectively, the “Indices”)
Interest Payments: If
the notes have not been automatically called, you will receive on each Interest Payment Date for each $1,000 principal amount note
an Interest Payment equal to at least $6.75 per month (equivalent to an Interest Rate of at least 8.10% per annum, payable at a
rate of at least 0.675% per month) (to be provided in the pricing supplement).
Interest Rate: At
least 8.10% per annum, payable at a rate of at least 0.675% per month (to be provided in the pricing supplement)
Pricing Date: On
or about November 25, 2019
Original Issue Date (Settlement Date):
On or about November 29, 2019
Review Dates*: May
26, 2020, August 25, 2020 and November 25, 2020 (final Review Date)
Interest Payment Dates*: December
31, 2019, January 30, 2020, February 28, 2020, March 30, 2020, April 30, 2020, May 29, 2020, June 30, 2020, July 30, 2020, August
28, 2020, September 30, 2020, October 29, 2020 and the Maturity Date
Maturity Date*: December
1, 2020
Trigger Value: With
respect to each Index, 70.00% of its Initial Value
Call Settlement Date*: If
the notes are automatically called on any Review Date (other than the final Review Date), 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
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|
Least Performing Index: The
Index with the Least Performing Index Return
Least Performing Index Return: The
lowest of the Index Returns of the Indices
Index Return: With
respect to each Index,
(Final
Value – Initial Value)
Initial Value
Initial Value: With
respect to each Index, the closing level of that Index on the Pricing Date
Final Value: With
respect to each Index, the closing level of that Index on the final Review Date
Trigger Event: A
Trigger Event occurs if, on any day during the Monitoring Period, the closing level of any Index is less than its Trigger Value
Monitoring Period: The
period from but excluding the Pricing Date to and including the final Review Date
Automatic Call: If
the closing level of each Index on any Review Date (other than the final 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, equal to (a) $1,000 plus (b)
the Interest Payment for the Interest Payment Date occurring on the applicable Call Settlement Date, payable on that Call Settlement
Date. No further payments will be made on the notes.
Payment at Maturity:
If the notes have not been
automatically called and (i) the Final Value of each Index is greater than or equal to its Initial Value or (ii) a Trigger Event
has not occurred, you will receive a cash payment at maturity, for each $1,000 principal amount note, equal to (a) $1,000 plus
(b) the Interest Payment applicable to the Maturity Date.
If the
notes have not been automatically called and (i) the Final Value of any Index is less than its Initial Value and (ii) a Trigger
Event has occurred, your payment at maturity per $1,000 principal amount note, in addition to the Interest Payment applicable to
the Maturity Date, will be calculated as follows:
$1,000
+ ($1,000 × Least Performing Index Return)
If the notes have not been
automatically called and (i) the Final Value of any Index is less than its Initial Value and (ii) a Trigger Event has occurred,
you will lose some or all of your principal amount at maturity.
|
PS-1| Structured Investments
Auto Callable Yield Notes Linked to the Least
Performing of the NASDAQ-100 Index®, the Russell 2000® Index and the S&P 500®
Index
|
|
How
the Notes Work
Payments in Connection with Review Dates Preceding
the Final Review Date
Payment at Maturity If the Notes Have Not Been
Automatically Called
Total Interest Payments
The table below illustrates the hypothetical total
Interest Payments per $1,000 principal amount note over the term of the notes based on a hypothetical Interest Rate of 8.10% per
annum, depending on how many Interest Payments are made prior to automatic call or maturity. If the notes have not been automatically
called, the hypothetical total Interest Payments per $1,000 principal amount note over the term of the notes will be equal to the
maximum amount shown in the table below. The actual Interest Rate will be provided in the pricing supplement and will be at least
8.10% per annum.
Number of Interest Payments
|
Total Interest Payments
|
12
|
$81.00
|
9
|
$60.75
|
6
|
$40.50
|
PS-2| Structured Investments
Auto Callable Yield Notes Linked to the Least
Performing of the NASDAQ-100 Index®, the Russell 2000® Index and the S&P 500®
Index
|
|
Hypothetical
Payout Examples
The
following examples illustrate payments on the notes linked to three hypothetical Indices, assuming a range of performances for
the hypothetical Least Performing Index on the Review Dates. Each hypothetical payment
set forth below assumes that the closing level of each Index that is not the Least Performing Index on each Review Date is greater
than or equal to its Initial Value.
In addition, the hypothetical payments set forth
below assume the following:
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●
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an Initial Value for the Least Performing Index
of 100.00;
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●
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a Trigger Value for the Least Performing Index
of 70.00 (equal to 70.00% of its hypothetical
Initial Value); and
|
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●
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an Interest Rate of 8.10% per annum (payable at
a rate of 0.675% per month).
|
The hypothetical Initial Value of the Least
Performing Index of 100.00 has been chosen for illustrative purposes only and may not represent a likely actual Initial
Value of any Index.
The actual Initial Value of each Index
will be the closing level of that Index on
the Pricing Date and will be provided in the pricing supplement. For historical data regarding the actual closing levels of each
Index, please see the historical information set forth under “The Indices” in this pricing supplement.
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 first Review Date
Date
|
Closing Level of Least Performing Index
|
|
First Review Date
|
101.00
|
Notes are automatically called
|
|
Total Payment
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$1,040.50 (4.50% return)
|
Because the closing level of each Index on the
first 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 $1,006.75 (or $1,000 plus the Interest Payment applicable to the corresponding Interest
Payment Date), payable on the applicable Call Settlement Date. When added to the Interest Payments received with respect to the
prior Interest Payment Dates, the total amount paid, for each $1,000 principal amount note, is $1,040.50. No further payments will
be made on the notes.
Example 2 — Notes are automatically
called on the second Review Date
Date
|
Closing Level of Least Performing Index
|
|
First Review Date
|
95.00
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Notes NOT automatically called
|
Second Review Date
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110.00
|
Notes are automatically called
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|
Total Payment
|
$1,060.75 (6.075% return)
|
Because the closing level of each Index 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 $1,006.75 (or $1,000 plus the Interest Payment applicable to the corresponding Interest
Payment Date), payable on the applicable Call Settlement Date. When added to the Interest Payments received with respect to the
prior Interest Payment Dates, the total amount paid, for each $1,000 principal amount note, is $1,060.75. No further payments will
be made on the notes.
PS-3| Structured Investments
Auto Callable Yield Notes Linked to the Least
Performing of the NASDAQ-100 Index®, the Russell 2000® Index and the S&P 500®
Index
|
|
Example 3 — Notes have NOT been
automatically called, the Final Value of the Least Performing Index is greater than or equal to its Initial Value and a Trigger
Event has occurred
Date
|
Closing Level of Least Performing Index
|
|
First Review Date
|
90.00
|
Notes NOT automatically called
|
Second Review Date
|
95.00
|
Notes NOT automatically called
|
Final Review Date
|
105.00
|
Final Value of Least Performing Index is greater than or equal to its Initial Value
|
|
Total Payment
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$1,081.00 (8.10% return)
|
Because the notes have not been automatically
called and the Final Value of the Least Performing Index is greater than or equal to its Initial Value, even though a Trigger Event
has occurred, the payment at maturity, for each $1,000 principal amount note, will be $1,006.75 (or $1,000 plus the Interest
Payment applicable to the Maturity Date). When added to the Interest Payments received with respect to the prior Interest Payment
Dates, the total amount paid, for each $1,000 principal amount note, is $1,081.00.
Example 4 — Notes have NOT been
automatically called, the Final Value of the Least Performing Index is less than its Initial Value and a Trigger Event has NOT
occurred
Date
|
Closing Level of Least Performing Index
|
|
First Review Date
|
85.00
|
Notes NOT automatically called
|
Second Review Date
|
80.00
|
Notes NOT automatically called
|
Final Review Date
|
90.00
|
Final Value of Least Performing Index is less than its Initial Value
|
|
Total Payment
|
$1,081.00 (8.10% return)
|
Because the notes have not been automatically
called and a Trigger Event has not occurred, even though the Final Value of the Least Performing Index is less than its Initial
Value, the payment at maturity, for each $1,000 principal amount note, will be $1,006.75 (or $1,000 plus the Interest Payment
applicable to the Maturity Date). When added to the Interest Payments received with respect to the prior Interest Payment Dates,
the total amount paid, for each $1,000 principal amount note, is $1,081.00.
Example 5 — Notes have NOT been
automatically called, the Final Value of the Least Performing Index is less than its Initial Value and a Trigger Event has occurred
Date
|
Closing Level of Least Performing Index
|
|
First Review Date
|
90.00
|
Notes NOT automatically called
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Second Review Date
|
80.00
|
Notes NOT automatically called
|
Final Review Date
|
50.00
|
Final Value of Least Performing Index is less than its Initial Value
|
|
Total Payment
|
$581.00 (-41.90% return)
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Because the notes have not been automatically
called, the Final Value of the Least Performing Index is less than its Initial Value, a Trigger Event has occurred and the Least
Performing Index Return is -50.00%, the payment at maturity will be $506.75 per $1,000 principal amount note, calculated as follows:
$1,000 + [$1,000 × (-50.00%)] + $6.75 =
$506.75
When added to the Interest Payments received with
respect to the prior Interest Payment Dates, the total amount paid, for each $1,000 principal amount note, is $581.00.
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.
PS-4| Structured Investments
Auto Callable Yield Notes Linked to the Least
Performing of the NASDAQ-100 Index®, the Russell 2000® Index and the S&P 500®
Index
|
|
Selected
Risk Considerations
An investment in the notes involves significant risks. These risks
are explained in more detail in the “Risk Factors” sections of the accompanying product supplement and underlying supplement.
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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 (i) the Final Value of
any Index is less than its Initial Value and (ii) a Trigger Event has occurred, you will lose 1% of the principal amount of your
notes for every 1% that the Final Value of the Least Performing Index is less than its Initial Value. Accordingly, under these
circumstances, you will lose some or all of your principal amount at maturity.
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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.
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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.
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THE APPRECIATION POTENTIAL OF THE NOTES IS LIMITED TO THE SUM OF THE INTEREST PAYMENTS PAID OVER THE TERM OF THE NOTES,
regardless of any appreciation of any Index, which may be significant. You will not participate in any appreciation of any Index.
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●
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POTENTIAL CONFLICTS —
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.
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JPMORGAN CHASE & CO. IS CURRENTLY ONE OF THE COMPANIES THAT MAKE UP THE S&P 500® INDEX,
but JPMorgan Chase & Co. will not have any obligation to consider your interests in taking any corporate action that might
affect the level of the S&P 500® Index.
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NON-U.S. SECURITIES RISK WITH RESPECT TO THE NASDAQ-100 INDEX® —
Some of the equity securities included in the NASDAQ-100 Index® have been issued by non-U.S. companies. Investments
in securities linked to the value of such non-U.S. equity securities involve risks associated with the securities markets in the
home countries of the issuers of those non-U.S. equity securities. Also, there is generally less publicly available information
about companies in some of these jurisdictions than there is about U.S. companies that are subject to the reporting requirements
of the SEC.
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AN INVESTMENT IN THE NOTES IS SUBJECT TO RISKS ASSOCIATED WITH SMALL CAPITALIZATION STOCKS WITH RESPECT TO THE RUSSELL 2000®
INDEX —
Small capitalization companies may be less able to withstand adverse economic, market, trade and competitive conditions relative
to larger companies. Small capitalization companies are less likely to pay dividends on their stocks, and the presence of a dividend
payment could be a factor that limits downward stock price pressure under adverse market conditions.
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●
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YOU ARE EXPOSED TO THE RISK OF DECLINE IN THE LEVEL OF EACH INDEX —
Poor performance by any of the Indices over the term of the notes may negatively affect whether you will receive your payment at
maturity and will not be offset or mitigated by positive performance by any other Index.
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●
|
YOUR PAYMENT AT MATURITY WILL BE DETERMINED BY THE LEAST PERFORMING INDEX.
|
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●
|
THE BENEFIT PROVIDED BY THE TRIGGER VALUE MAY TERMINATE ON ANY DAY DURING THE MONITORING PERIOD —
If, on any day during the Monitoring Period, the closing level of any Index is less than its Trigger Value (i.e., a Trigger
Event occurs), 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 of the Least
Performing Index. You will be subject to this potential loss of principal even if that Index subsequently recovers such
that the closing level of that Index is greater than or equal to its Trigger Value.
|
|
●
|
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 six months and you will not receive
any 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, noteholders are not entitled to any fees and commissions described on the
front cover of this pricing supplement.
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●
|
YOU WILL NOT RECEIVE DIVIDENDS ON THE SECURITIES INCLUDED IN ANY INDEX OR HAVE ANY RIGHTS WITH RESPECT TO THOSE SECURITIES.
|
PS-5| Structured Investments
Auto Callable Yield Notes Linked to the Least
Performing of the NASDAQ-100 Index®, the Russell 2000® Index and the S&P 500®
Index
|
|
|
●
|
THE RISK OF THE CLOSING LEVEL OF AN INDEX FALLING BELOW ITS TRIGGER VALUE IS GREATER IF THE LEVEL OF THAT INDEX IS VOLATILE.
|
|
●
|
LACK OF LIQUIDITY —
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 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.
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|
●
|
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.
|
|
●
|
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 may differ from the market-implied funding
rate for vanilla fixed income instruments of a similar maturity issued by JPMorgan Chase & Co. or its affiliates. Any difference
may be 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
income instruments of JPMorgan Chase & Co. This internal funding rate is based on certain market inputs and assumptions, which
may prove to be incorrect, and is intended to approximate the prevailing market replacement funding rate for the notes. 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).
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|
●
|
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 may exclude selling commissions, 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 levels of the Indices. 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-6| Structured Investments
Auto Callable Yield Notes Linked to the Least
Performing of the NASDAQ-100 Index®, the Russell 2000® Index and the S&P 500®
Index
|
|
The
Indices
The NASDAQ-100 Index® is a modified
market capitalization-weighted index of 100 of the largest non-financial securities listed on The NASDAQ Stock Market based on
market capitalization. For additional information about the NASDAQ-100 Index®, see “Equity Index Descriptions
— The NASDAQ-100 Index®” in the accompanying underlying supplement.
The Russell 2000® Index consists
of the middle 2,000 companies included in the Russell 3000E™ Index and, as a result of the index calculation methodology,
consists of the smallest 2,000 companies included in the Russell 3000® Index. The Russell 2000® Index
is designed to track the performance of the small capitalization segment of the U.S. equity market. For additional information
about the Russell 2000® Index, see “Equity Index Descriptions — The Russell Indices” in the accompanying
underlying supplement.
The S&P 500® Index consists
of stocks of 500 companies selected to provide a performance benchmark for the U.S. equity markets. For additional information
about the S&P 500® Index, see “Equity Index Descriptions — The S&P U.S. Indices” in the
accompanying underlying supplement.
Historical Information
The following graphs set forth the historical
performance of each Index based on the weekly historical closing levels from January 3, 2014 through November 8, 2019. The closing
level of the NASDAQ-100 Index® on November 11, 2019 was 8,241.912. The closing level of the Russell 2000®
Index on November 11, 2019 was 1,594.770. The closing level of the S&P 500® Index on November 11, 2019 was 3,087.01.
We obtained the closing levels above and below from the Bloomberg Professional® service (“Bloomberg”),
without independent verification.
The historical closing levels of each Index should
not be taken as an indication of future performance, and no assurance can be given as to the closing level of any Index on the
Pricing Date, on any day during the Monitoring Period or on any Review Date. There can be no assurance that the performance of
the Indices will result in the return of any of your principal amount.
Historical Performance
of the NASDAQ-100 Index®
Source: Bloomberg
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PS-7| Structured Investments
Auto Callable Yield Notes Linked to the Least
Performing of the NASDAQ-100 Index®, the Russell 2000® Index and the S&P 500®
Index
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Historical Performance
of the Russell 2000® Index
Source: Bloomberg
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Historical Performance
of the S&P 500® Index
Source: Bloomberg
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PS-8| Structured Investments
Auto Callable Yield Notes Linked to the Least
Performing of the NASDAQ-100 Index®, the Russell 2000® Index and the S&P 500®
Index
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Tax
Treatment
You should review carefully the section entitled
“Material U.S. Federal Income Tax Consequences” in the accompanying product supplement no. 4-I. Based on the advice
of Sidley Austin LLP, our special tax counsel, and on current market conditions, in determining our reporting responsibilities
we intend to treat the notes for U.S. federal income tax purposes as units each comprising: (x) a Put Option written by you that
is terminated if an Automatic Call occurs and that, if not terminated, in circumstances where the payment due at maturity is less
than $1,000 (excluding accrued and unpaid interest), requires you to pay us an amount equal to $1,000 multiplied by the absolute
value of the Least Performing Index Return and (y) a Deposit of $1,000 per $1,000 principal amount note to secure your potential
obligation under the Put Option as more fully described in “Material U.S. Federal Income Tax Consequences — Tax Consequences
to U.S. Holders — Notes Treated as Units Each Comprising a Put Option and a Deposit” in the accompanying product supplement.
By purchasing the notes, you agree (in the absence of an administrative determination or judicial ruling to the contrary) to follow
this treatment and the allocation described in the following paragraph. However, there are other reasonable treatments that the
Internal Revenue Service (the “IRS”) or a court may adopt, in which case the timing and character of any income or
loss on the notes could be significantly and adversely affected. In addition, in 2007, the Treasury Department and the IRS released
a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts” and similar instruments.
While it is not clear whether the notes would be viewed as similar to the typical prepaid forward contract described in the notice,
it is possible that any Treasury regulations or other guidance promulgated after consideration of these issues could materially
and adversely affect the tax consequences of an investment in the notes, possibly with retroactive effect. The notice focuses on
a number of issues, the most relevant of which for holders of the notes are the character of income or loss (including whether
the Put Premium might be currently included as ordinary income) and the degree, if any, to which income realized by Non-U.S. Holders
should be subject to withholding tax.
We will determine the portion of each interest
payment on the notes that we will allocate to interest on the Deposit and to Put Premium, respectively, and will provide that allocation
in the pricing supplement for the notes. If the notes had priced on November 12, 2019, we would have allocated approximately 22.96%
of each interest payment to interest on the Deposit and approximately 77.04% of each interest payment to Put Premium. The actual
allocation that we will determine for the notes may differ from this hypothetical allocation, and will depend upon a variety of
factors, including actual market conditions and our borrowing costs for debt instruments of comparable maturities on the Pricing
Date. Assuming that the treatment of the notes as units each comprising a Put Option and a Deposit is respected, amounts treated
as interest on the Deposit will be taxed as ordinary income, while the Put Premium will not be taken into account prior to sale
or settlement, including a settlement following an Automatic Call.
Non-U.S. Holders – Additional Tax Consideration
Non-U.S. Holders should note that a withholding
tax of 30% could be imposed on payments made on the notes to certain foreign entities unless information reporting and diligence
requirements are met, as described in “Material U.S. Federal Income Tax Consequences — FATCA” in the accompanying
product supplement. Pursuant to the final regulations, such withholding tax will generally apply to obligations that are issued
on or after July 1, 2014; therefore, the notes will generally be subject to this withholding tax. The discussion in the accompanying
product supplement is modified to reflect regulations proposed by the Treasury Department indicating its intent to eliminate the
requirements under FATCA of withholding on gross proceeds from the sale, exchange, maturity or other disposition of relevant financial
instruments. The Treasury Department has indicated that taxpayers may rely on these proposed regulations pending their finalization.
Section 871(m) of the Internal Revenue 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,
in particular 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, a recent IRS notice excludes from the scope of Section
871(m) instruments issued prior to January 1, 2021 that are not “delta-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, our special tax counsel, Sidley Austin LLP, is of the opinion that Section 871(m) should 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. You should consult your tax adviser regarding the potential application of
Section 871(m) to the notes.
Both U.S. and Non-U.S. Holders should consult
their tax advisers regarding all aspects of the U.S. federal income tax consequences of an investment in the notes, including possible
alternative treatments and the issues presented by the 2007 notice. Purchasers who are not initial purchasers of notes at the issue
price should also consult their tax advisers with respect to the tax consequences of an investment in the notes, including possible
alternative treatments, as well as the allocation of the purchase price of the notes between the Deposit and the Put Option.
PS-9| Structured Investments
Auto Callable Yield Notes Linked to the Least
Performing of the NASDAQ-100 Index®, the Russell 2000® Index and the S&P 500®
Index
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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 may differ from the market-implied funding rate for vanilla fixed
income instruments of a similar maturity issued by JPMorgan Chase & Co. or its affiliates. Any difference may be 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 income instruments
of JPMorgan Chase & Co. This internal funding rate is based on certain market inputs and assumptions, which may prove to be
incorrect, and is intended to approximate the prevailing market replacement funding rate for the notes. 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. For additional 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 selling commissions, 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 Indices” 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.
PS-10| Structured Investments
Auto Callable Yield Notes Linked to the Least
Performing of the NASDAQ-100 Index®, the Russell 2000® Index and the S&P 500®
Index
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Supplemental
Plan of Distribution
We expect that delivery of the notes will be made
against payment for the notes on or about the Original Issue Date set forth on the front cover of this pricing supplement, which
will be the third business day following the Pricing Date of the notes (this settlement cycle being referred to as “T+3”).
Under Rule 15c6-1 of the Securities Exchange Act of 1934, as amended, trades in the secondary market generally are required to
settle in two business days, unless the parties to that trade expressly agree otherwise. Accordingly, purchasers who wish to trade
notes on any date prior to two business days before delivery will be required to specify an alternate settlement cycle at the time
of any such trade to prevent a failed settlement and should consult their own advisors.
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.
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 and the
accompanying underlying 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” sections of the accompanying product supplement and the accompanying underlying 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-11| Structured Investments
Auto Callable Yield Notes Linked to the Least
Performing of the NASDAQ-100 Index®, the Russell 2000® Index and the S&P 500®
Index
|
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