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 September
14, 2018
September , 2018
|
Registration Statement Nos. 333-222672 and 333-222672-01; Rule 424(b)(2)
|
JPMorgan Chase Financial Company LLC
Structured Investments
Capped Buffered Return Enhanced Notes Linked
to the Bloomberg Commodity Index
SM
due September 30, 2020
Fully and Unconditionally Guaranteed by JPMorgan
Chase & Co.
|
·
|
The notes are designed for investors who seek a return of 2.00 times any appreciation of the Bloomberg Commodity Index
SM
,
up to a maximum return of at least 22.50%, at maturity.
|
|
·
|
Investors should be willing to forgo interest payments and be willing to lose up to 90.00% of their principal amount at maturity.
|
|
·
|
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.
|
|
·
|
Minimum denominations of $1,000 and integral multiples thereof
|
|
·
|
The notes are expected to price on or about September 25, 2018 and are expected to settle on or about September 28, 2018.
|
Investing in the notes involves a number of risks. See
“Risk Factors” beginning on page PS-9 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-4 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
|
—
|
$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) All sales of the notes will be made to certain
fee-based advisory accounts for which an affiliated or unaffiliated broker-dealer is an investment adviser. These broker-dealers
will forgo any commissions related to these sales. 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 $988.70 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. 2-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.
Index:
The
Bloomberg Commodity Index
SM
(Bloomberg ticker: BCOM)
Maximum Return:
At least 22.50% (corresponding to a maximum payment at maturity of at least $1,225.00 per
$1,000 principal amount note) (to be provided in the pricing supplement)
Upside Leverage
Factor:
2.00
Buffer Amount:
10.00%
Pricing
Date:
On or about September 25, 2018
Original Issue
Date (Settlement Date):
On or about September 28, 2018
Observation
Date
*
:
September
25, 2020
Maturity Date*:
September 30, 2020
* 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 a Single Underlying — Notes Linked to a Single Index” and “General Terms of Notes — Postponement
of a Payment Date” in the accompanying product supplement or early acceleration in the event of a commodity hedging disruption
event as described under “General Terms of Notes — Consequences of a Commodity Hedging Disruption Event —
Acceleration of the Notes” in the accompanying product supplement and in “Selected Risk Considerations — We May
Accelerate Your Notes If a Commodity Hedging Disruption Event Occurs” in this pricing supplement
Payment at Maturity:
If the Final Value is greater than the Initial
Value, your payment at maturity per $1,000 principal amount note will be calculated as follows:
$1,000 + ($1,000 ×
Index Return × Upside Leverage Factor), subject to the Maximum Return
If the Final Value is equal to the Initial Value
or is less than the Initial Value by up to the Buffer Amount, you will receive the principal amount of your notes at maturity.
If the Final Value is less than the Initial
Value by more than the Buffer Amount, your payment at maturity per $1,000 principal amount note will be calculated as follows:
$1,000 + [$1,000 ×
(Index Return + Buffer Amount)]
If the Final Value is less than the Initial
Value by more than the Buffer Amount, you will lose some or most of your principal amount at maturity.
Index Return:
(Final Value –
Initial Value)
Initial Value
Initial Value:
The closing level of the Index on the Pricing Date
Final Value:
The closing level of the Index on the Observation Date
PS-
1
| Structured Investments
Capped Buffered Return Enhanced Notes Linked to the Bloomberg
Commodity Index
SM
|
|
Hypothetical
Payout Profile
The following table illustrates the hypothetical
total return and payment at maturity on the notes linked to a hypothetical Index. The “total return” as used in this
pricing supplement is the number, expressed as a percentage, that results from comparing the payment at maturity per $1,000 principal
amount note to $1,000. The hypothetical total returns and payments set forth below assume the following:
|
·
|
an Initial Value of 100.00;
|
|
·
|
a Maximum Return of 22.50%;
|
|
·
|
an Upside Leverage Factor of 2.00; and
|
|
·
|
a Buffer Amount of 10.00%.
|
The hypothetical Initial Value of 100.00 has been
chosen for illustrative purposes only and may not represent a likely actual Initial Value. The actual Initial Value will be the
closing level of the Index on the Pricing Date and will be provided in the pricing supplement. For historical data regarding the
actual closing levels of the Index, please see the historical information set forth under “The Index” in this pricing
supplement.
Each hypothetical total return or hypothetical
payment at maturity set forth below is for illustrative purposes only and may not be the actual total return or payment at maturity
applicable to a purchaser of the notes. The numbers appearing in the following table have been rounded for ease of analysis.
Final Value
|
Index Return
|
Total Return on the Notes
|
Payment at Maturity
|
180.00
|
80.00%
|
22.50%
|
$1,225.00
|
165.00
|
65.00%
|
22.50%
|
$1,225.00
|
150.00
|
50.00%
|
22.50%
|
$1,225.00
|
140.00
|
40.00%
|
22.50%
|
$1,225.00
|
130.00
|
30.00%
|
22.50%
|
$1,225.00
|
120.00
|
20.00%
|
22.50%
|
$1,225.00
|
111.25
|
11.25%
|
22.50%
|
$1,225.00
|
110.00
|
10.00%
|
20.00%
|
$1,200.00
|
105.00
|
5.00%
|
10.00%
|
$1,100.00
|
101.00
|
1.00%
|
2.00%
|
$1,020.00
|
100.00
|
0.00%
|
0.00%
|
$1,000.00
|
95.00
|
-5.00%
|
0.00%
|
$1,000.00
|
90.00
|
-10.00%
|
0.00%
|
$1,000.00
|
85.00
|
-15.00%
|
-5.00%
|
$950.00
|
80.00
|
-20.00%
|
-10.00%
|
$900.00
|
70.00
|
-30.00%
|
-20.00%
|
$800.00
|
60.00
|
-40.00%
|
-30.00%
|
$700.00
|
50.00
|
-50.00%
|
-40.00%
|
$600.00
|
40.00
|
-60.00%
|
-50.00%
|
$500.00
|
30.00
|
-70.00%
|
-60.00%
|
$400.00
|
20.00
|
-80.00%
|
-70.00%
|
$300.00
|
10.00
|
-90.00%
|
-80.00%
|
$200.00
|
0.00
|
-100.00%
|
-90.00%
|
$100.00
|
PS-
2
| Structured Investments
Capped Buffered Return Enhanced Notes Linked to the Bloomberg
Commodity Index
SM
|
|
How
the Notes Work
Upside Scenario:
If the Final Value is greater than the Initial
Value, investors will receive at maturity the $1,000 principal amount
plus
a return equal to the Index Return
times
the
Upside Leverage Factor of 2.00, subject to the Maximum Return of at least 22.50%. Assuming a hypothetical Maximum Return of 22.50%,
an investor will realize the maximum payment at maturity at a Final Value at or above 11.25% of the Initial Value.
|
·
|
If the closing level of the Index increases 5.00%, investors will receive
at maturity a 10.00% return, or $1,100.00 per $1,000 principal amount note.
|
|
·
|
Assuming a hypothetical Maximum Return of 22.50%, if the closing level of
the Index increases 40.00%, investors will receive at maturity a return equal to the 22.50% Maximum Return, or $1,225.00 per $1,000
principal amount note, which is the maximum payment at maturity.
|
Par Scenario:
If the Final Value is equal to the Initial Value
or is less than the Initial Value by up to the Buffer Amount of 10.00%, investors will receive at maturity the principal amount
of their notes.
Downside Scenario:
If the Final Value is less than the Initial Value
by more than the Buffer Amount of 10.00%, investors will lose 1% of the principal amount of their notes for every 1% that the Final
Value is less than the Initial Value by more than the Buffer Amount.
|
·
|
For example, if the closing level of the Index declines 60.00%, investors
will lose 50.00% of their principal amount and receive only $500.00 per $1,000 principal amount note at maturity.
|
The hypothetical returns and hypothetical payments
on the notes shown above apply
only if you hold the notes for their entire term.
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-
3
| Structured Investments
Capped Buffered Return Enhanced Notes Linked to the Bloomberg
Commodity Index
SM
|
|
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.
|
·
|
YOUR INVESTMENT IN THE NOTES MAY RESULT IN A LOSS —
|
The notes do not guarantee any return
of principal. If the Final Value is less than the Initial Value by more than 10.00%, you will lose 1% of the principal amount of
your notes for every 1% that the Final Value is less than the Initial Value by more than 10.00%. Accordingly, under these circumstances,
you will lose up to 90.00% of your principal amount at maturity.
|
·
|
YOUR MAXIMUM GAIN ON THE NOTES IS LIMITED TO THE MAXIMUM RETURN,
|
regardless of any appreciation of the
Index, which may be significant.
|
·
|
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.
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.
|
·
|
THE NOTES DO NOT PAY INTEREST.
|
|
·
|
YOU WILL NOT HAVE ANY RIGHTS WITH RESPECT TO THE COMMODITY FUTURE CONTRACTS INCLUDED IN THE INDEX.
|
|
·
|
WE MAY ACCELERATE YOUR NOTES IF A COMMODITY HEDGING DISRUPTION EVENT OCCURS —
|
If we or our affiliates are unable to
effect transactions necessary to hedge our obligations under the notes due to a commodity hedging disruption event, we may, in
our sole and absolute discretion, accelerate the payment on your notes and pay you an amount determined in good faith and in a
commercially reasonable manner by the calculation agent. If the payment on your notes is accelerated, your investment may result
in a loss and you may not be able to reinvest your money in a comparable investment. Please see “General Terms of Notes —
Consequences of a Commodity Hedging Disruption Event — Acceleration of the Notes” in the accompanying product supplement
for more information.
|
·
|
COMMODITY FUTURES CONTRACTS ARE SUBJECT TO UNCERTAIN LEGAL AND REGULATORY REGIMES —
|
The commodity futures contracts that
underlie the Index are subject to legal and regulatory regimes that may change in ways that could adversely affect our ability
to hedge our obligations under the notes and affect the level of the Index. Any future regulatory changes, including but
not limited to changes resulting from the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”),
may have a substantial adverse effect on the value of your notes. Additionally, under authority provided by the Dodd-Frank
Act, the U.S. Commodity Futures Trading Commission on December 5, 2016 proposed rules to establish position limits that will apply
to 25 agricultural, metals and energy futures contracts and futures, options and swaps that are economically equivalent to those
futures contracts. The limits would apply to a person’s combined position in futures, options and swaps on the
PS-
4
| Structured Investments
Capped Buffered Return Enhanced Notes Linked to the Bloomberg
Commodity Index
SM
|
|
same underlying commodity. The rules,
if enacted in their proposed form, may reduce liquidity in the exchange-traded market for those commodity-based futures contracts,
which may, in turn, have an adverse effect on any payments on the notes. Furthermore, we or our affiliates may be unable
as a result of those restrictions to effect transactions necessary to hedge our obligations under the notes resulting in a commodity
hedging disruption event, in which case we may, in our sole and absolute discretion, accelerate your notes. See “—
We May Accelerate Your Notes If a Commodity Hedging Disruption Event Occurs” above.
|
·
|
PRICES OF COMMODITY FUTURES CONTRACTS ARE CHARACTERIZED BY HIGH AND UNPREDICTABLE VOLATILITY, WHICH COULD LEAD TO HIGH AND
UNPREDICTABLE VOLATILITY IN THE INDEX —
|
Market prices of the commodity futures
contracts included in the Index tend to be highly volatile and may fluctuate rapidly based on numerous factors, including changes
in supply and demand relationships, governmental programs and policies, national and international monetary, trade, political and
economic events, wars and acts of terror, changes in interest and exchange rates, speculation and trading activities in commodities
and related contracts, weather, and agricultural, trade, fiscal and exchange control policies. The prices of commodities and commodity
futures contracts are subject to variables that may be less significant to the values of traditional securities, such as stocks
and bonds. These variables may create additional investment risks that cause the value of the notes to be more volatile than the
values of traditional securities. As a general matter, the risk of low liquidity or volatile pricing around the maturity date of
a commodity futures contract is greater than in the case of other futures contracts because (among other factors) a number of market
participants take physical delivery of the underlying commodities. Many commodities are also highly cyclical. The high volatility
and cyclical nature of commodity markets may render such an investment inappropriate as the focus of an investment portfolio.
|
·
|
A DECISION BY AN EXCHANGE ON WHICH THE COMMODITY FUTURES CONTRACTS UNDERLYING THE INDEX ARE TRADED TO INCREASE MARGIN REQUIREMENTS
FOR THOSE FUTURES CONTRACTS MAY AFFECT THE LEVEL OF THE INDEX —
|
If an exchange on which the commodity
futures contracts underlying the Index are traded increases the amount of collateral required to be posted to hold positions in
those futures contracts (
i.e.,
the margin requirements), market participants who are unwilling or unable to post additional
collateral may liquidate their positions, which may cause the level of the Index to decline significantly.
|
·
|
THE NOTES DO NOT OFFER DIRECT EXPOSURE TO COMMODITY SPOT PRICES WITH RESPECT TO THE INDEX —
|
The notes are linked to the Index, which
tracks commodity futures contracts, not physical commodities (or their spot prices). The price of a futures contract reflects the
expected value of the commodity upon delivery in the future, whereas the spot price of a commodity reflects the immediate delivery
value of the commodity. A variety of factors can lead to a disparity between the expected future price of a commodity and the spot
price at a given point in time, such as the cost of storing the commodity for the term of the futures contract, interest charges
incurred to finance the purchase of the commodity and expectations concerning supply and demand for the commodity. The price movements
of a futures contract are typically correlated with the movements of the spot price of the referenced commodity, but the correlation
is generally imperfect and price movements in the spot market may not be reflected in the futures market (and vice versa). Accordingly,
the notes may underperform a similar investment that is linked to commodity spot prices.
|
·
|
HIGHER FUTURES PRICES OF THE COMMODITY FUTURES CONTRACTS UNDERLYING THE INDEX RELATIVE TO THE CURRENT PRICES OF THOSE CONTRACTS
MAY AFFECT THE LEVEL OF THE INDEX AND THE VALUE OF THE NOTES —
|
The Index is composed of futures contracts
on physical commodities. Unlike equities, which typically entitle the holder to a continuing stake in a corporation, commodity
futures contracts normally specify a certain date for delivery of the underlying physical commodity. As the exchange-traded futures
contracts that compose the Index approach expiration, they are replaced by contracts that have a later expiration. Thus, for example,
a contract purchased and held in August may specify an October expiration. As time passes, the contract expiring in October is
replaced with a contract for delivery in November. This process is referred to as “rolling.” If the market for these
contracts is (putting aside other considerations) in “contango,” where the prices are higher in the distant delivery
months than in the nearer delivery months, the purchase of the November contract would take place at a price that is higher than
the price of the October contract, thereby creating a
negative
“roll yield.” Contango could adversely affect
the level of the Index and thus the value of notes linked to the Index. The futures contracts underlying the Index have historically
been in contango.
PS-
5
| Structured Investments
Capped Buffered Return Enhanced Notes Linked to the Bloomberg
Commodity Index
SM
|
|
|
·
|
SUSPENSION OR DISRUPTIONS OF MARKET TRADING IN THE COMMODITY MARKETS AND RELATED FUTURES MARKETS MAY ADVERSELY AFFECT THE
LEVEL OF THE INDEX, AND THEREFORE THE VALUE OF THE NOTES —
|
The commodity markets are subject to
temporary distortions or other disruptions due to various factors, including the lack of liquidity in the markets, the participation
of speculators and government regulation and intervention. In addition, U.S. futures exchanges and some foreign exchanges have
regulations that limit the amount of fluctuation in futures contract prices that may occur during a single day. These limits are
generally referred to as “daily price fluctuation limits” and the maximum or minimum price of a contract on any given
day as a result of these limits is referred to as a “limit price.” Once the limit price has been reached in a particular
contract, no trades may be made at a different price. Limit prices have the effect of precluding trading in a particular contract
or forcing the liquidation of contracts at disadvantageous times or prices. These circumstances could adversely affect the level
of the Index and, therefore, the value of your notes.
|
·
|
THE NOTES ARE LINKED TO AN EXCESS RETURN INDEX AND NOT A TOTAL RETURN INDEX —
|
The notes are linked to an excess return
index and not a total return index. An excess return index, such as the Index, reflects the returns that are potentially
available through an unleveraged investment in the contracts composing that index. By contrast, a “total return” index,
in addition to reflecting those returns, also reflects interest that could be earned on funds committed to the trading of the underlying
futures contracts.
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 J.P. Morgan Securities LLC, which we refer to as 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 Maximum Return.
|
·
|
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 structuring and hedging the notes are included in the original issue price of the notes.
These costs include 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.
|
·
|
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).
PS-
6
| Structured Investments
Capped Buffered Return Enhanced Notes Linked to the Bloomberg
Commodity Index
SM
|
|
|
·
|
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 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 projected hedging profits, if any, estimated hedging costs and the price of the Index. 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
Capped Buffered Return Enhanced Notes Linked to the Bloomberg
Commodity Index
SM
|
|
The
Index
The Index is composed of exchange-traded futures
contracts on physical commodities and is designed to be a diversified benchmark for commodities as an asset class. Its component
weightings are determined primarily based on liquidity data, which is the relative amount of trading activity of a particular commodity.
The Index is an excess return index and not a total return index. An excess return index reflects the returns that are potentially
available through an unleveraged investment in the contracts composing the index. By contrast, a “total return” index,
in addition to reflecting those returns, also reflects interest that could be earned on funds committed to the trading of the underlying
futures contracts. See “Commodity Index Descriptions — The Bloomberg Commodity Indices” in the accompanying underlying
supplement.
Historical Information
The following graph
sets forth the historical performance of the Index based on the weekly historical closing levels of the Index from
January
4, 2013
through September 7, 2018. The closing level of the Index on September 13, 2018 is 82.7206.
We obtained the closing levels above and below from the Bloomberg Professional
®
service (“Bloomberg”),
without independent verification.
The historical closing levels of the Index
should not be taken as an indication of future performance, and no assurance can be given as to the closing level of the Index
on the Pricing Date or the Observation Date. There can be no assurance that the performance of the Index will result in the return
of any of your principal amount in excess of $100.00 per $1,000 principal amount note, subject to the credit risks of JPMorgan
Financial and JPMorgan Chase & Co.
Tax
Treatment
You should review carefully the section entitled
“Material U.S. Federal Income Tax Consequences” in the accompanying product supplement no. 2-I. The following discussion,
when read in combination with that section, constitutes the full opinion of our special tax counsel, Davis Polk & Wardwell
LLP, regarding the material U.S. federal income tax consequences of owning and disposing of notes.
Based on current market conditions, in the
opinion of our special tax counsel it is reasonable to treat the notes as “open transactions” that are not debt instruments
for U.S. federal income tax purposes, as more fully described in “Material U.S. Federal Income Tax Consequences — Tax
Consequences to U.S. Holders — Notes Treated as Open Transactions That Are Not Debt Instruments” in the accompanying
product supplement. Assuming this treatment is respected, the gain or loss on your notes should be treated as long-term capital
gain or loss if you hold your notes for more than a year, whether or not you are an initial purchaser of notes at the issue price.
However, the IRS or a court may not respect this treatment, in which case the timing and character of any income or loss on the
notes could be materially and adversely 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
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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; the relevance of factors such as the nature of the underlying property to
which the instruments are linked; the degree, if any, to which income (including any mandated accruals) realized by non-U.S. investors
should be subject to withholding tax; and whether these instruments are or should be subject to the “constructive ownership”
regime, which very generally can operate to recharacterize certain long-term capital gain as ordinary income and impose a notional
interest charge. 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 and adversely 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.
Withholding under legislation commonly referred
to as “FATCA” may (if the notes are recharacterized as debt instruments) apply to amounts treated as interest paid
with respect to the notes, as well as to payments of gross proceeds of a taxable disposition, including redemption at maturity,
of a note. However, under a 2015 IRS notice, this regime will not apply to payments of gross proceeds (other than any amount treated
as interest) with respect to dispositions occurring before January 1, 2019. You should consult your tax adviser regarding the potential
application of FATCA to the notes.
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 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, 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 structuring and hedging the notes are included in
the original issue price of the notes. These costs include 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
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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 “Hypothetical Payout Profile”
and “How the Notes Work” in this pricing supplement for an illustration of the risk-return profile of the notes and
“The Index” 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 (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.
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.
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