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 22, 2017
March , 2017
|
Registration Statement Nos. 333-209682 and 333-209682-01; Rule 424(b)(2)
|
JPMorgan Chase Financial Company LLC
Structured Investments
Review Notes Linked to the Lesser Performing
of the Russell 2000
®
Index and the iShares
®
MSCI EAFE ETF due September 27, 2018
Fully and Unconditionally Guaranteed by JPMorgan
Chase & Co.
|
·
|
The notes are designed for investors who seek early exit prior to maturity at a premium if, on any Review Date, the closing
value of each of the Russell 2000
®
Index and the iShares
®
MSCI EAFE ETF, which we refer to as the
Underlyings, is at or above its Call Value.
|
|
·
|
The earliest date on which an automatic call may be initiated is March 22, 2018.
|
|
·
|
The notes are also designed for investors who seek a fixed return at maturity equal to the Contingent Minimum Return of 7.00%
if the notes have not been automatically called and the Final Value of each Underlying is not less than its Strike Value by more
than 20.00%.
|
|
·
|
Investors in the notes should be willing to forgo interest and dividend payments and be willing to accept the risk of losing
some or all 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.
|
|
·
|
Payments on the notes are not linked to a basket composed of the Underlyings. Payments on the notes are linked to
the performance of each of the Underlyings individually, as described below.
|
|
·
|
Minimum denominations of $1,000 and integral multiples thereof.
|
|
·
|
The notes are expected to price on or about March 23, 2017 (the “Pricing Date”) and are expected to settle on or
about March 28, 2017.
The Strike Value of each Underlying has been determined by reference to the closing value of
that Underlying on March 22, 2017 and not by reference to the closing value of that Underlying on the Pricing Date.
|
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-2 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
|
$
|
$
|
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. If the notes priced today, the selling commissions would be approximately $0.50 per $1,000
principal amount note and in no event will these selling commissions exceed $1.50 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 $990.50 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 $980.00 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, underlying supplement no. 1-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.
Underlyings:
The Russell 2000
®
Index (Bloomberg ticker: RTY) (the “Index”)
and the iShares
®
MSCI EAFE ETF (Bloomberg ticker: EFA) (the “Fund”) (each of the Index and the Fund,
an “Underlying” and collectively, the “Underlyings”)
Call Premium
Amount:
The Call Premium Amount with respect to each Review Date is
set forth below:
|
·
|
first Review Date:
|
at least 9.00% × $1,000
|
·
|
final Review Date:
|
at least 13.50% × $1,000
|
|
|
|
(in each case, to be provided
in the pricing supplement)
Call Value:
With respect to each Underlying, 100.00% of its Strike Value
Contingent
Minimum Return:
7.00%
Buffer Amount:
20.00%
Downside Leverage
Factor:
1.25
Strike Date:
March 22, 2017
Pricing
Date:
On or about March 23, 2017
Original Issue
Date (Settlement Date):
On or about March 28, 2017
Review Dates*:
March 22, 2018 and September 24, 2018 (final Review Date)
Call Settlement
Dates*:
March 29, 2018 and the Maturity Date
Maturity Date*:
September 27, 2018
* 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 value of each Underlying on any Review Date is
greater than or equal to its Call 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 Call Premium Amount applicable to that Review Date, 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 (i) the Final
Value of one Underlying is greater than or equal to its Strike Value and the Final Value of the other Underlying is less than its
Strike Value by up to the Buffer Amount or (ii) the Final Value of each Underlying is less than its Strike Value by up to the Buffer
Amount, your payment at maturity per $1,000 principal amount note will be calculated as follows:
$1,000 + ($1,000 × Contingent Minimum
Return)
If the notes have not been automatically called and the Final
Value of either Underlying is less than its Strike 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 × (Lesser Performing Underlying Return + Buffer Amount) × Downside Leverage Factor]
If the notes have not been
automatically called and the Final Value of either Underlying is less than its Strike Value by more than the Buffer Amount, you
will lose some or all of your principal amount at maturity.
Lesser Performing
Underlying:
The Underlying with the Lesser Performing Underlying Return
Lesser Performing
Underlying Return:
The lower of the Underlying Returns of the Underlyings
Underlying
Return:
With respect to each Underlying,
(Final Value – Strike Value)
Strike Value
Strike Value:
With respect to each Underlying, the closing value of that Underlying
on the Strike Date, which was 1,345.598 for the Index and $61.83 for the Fund.
The
Strike Value of each Underlying is
not
the closing value of that Underlying on the Pricing Date.
Final Value:
With respect to each Underlying, the closing value of that Underlying
on the final Review Date
Share Adjustment
Factor:
The Share Adjustment Factor is referenced in determining the closing value of
the Fund and is set equal to 1.0 on the Strike Date. The Share Adjustment Factor is subject to adjustment upon the occurrence
of certain events affecting the Fund. See “The Underlyings — Funds — Anti-Dilution Adjustments”
in the accompanying product supplement for further information.
|
PS-
1
| Structured Investments
Review Notes Linked to the Lesser Performing of the Russell 2000
®
Index and the iShares
®
MSCI EAFE ETF
|
|
Supplemental
Terms of the Notes
All references in this pricing supplement to
the closing value of the Index mean the closing level of the Index as defined in the accompanying product supplement, and all references
in this pricing supplement to the closing value of the Fund mean the closing price of one share of the Fund as defined in the accompanying
product supplement.
How
the Notes Work
Payment upon an Automatic Call
Payment at Maturity If the Notes Have Not
Been Automatically Called
Call Premium Amount
The table below illustrates the hypothetical
Call Premium Amount per $1,000 principal amount note for each Review Date based on the minimum Call Premium Amounts set forth under
“Key Terms — Call Premium Amount” above. The actual Call Premium Amounts will be provided in the pricing
supplement and will not be less than the minimum Call Premium Amounts set forth under “Key Terms — Call Premium Amount.”
PS-
2
| Structured Investments
Review Notes Linked to the Lesser Performing of the Russell 2000
®
Index and the iShares
®
MSCI EAFE ETF
|
|
Review Date
|
Call Premium Amount
|
First
|
$90.00
|
Final
|
$135.00
|
Hypothetical
Payout Examples
The following examples illustrate payments on
the notes linked to two hypothetical Underlyings, assuming a range of performances for the hypothetical Lesser Performing Underlying
on the Review Dates.
Each hypothetical payment set forth below assumes that the closing value of the Underlying that
is not the Lesser Performing Underlying on each Review Date is greater than or equal to its Call Value (and therefore is not less
than Strike Value by more than the Buffer Amount).
In addition, the hypothetical payments set forth
below assume the following:
|
·
|
a Strike Value for the Lesser Performing Underlying of 100.00;
|
|
·
|
a Call Value for the Lesser Performing Underlying of 100.00 (equal to 100.00% of the hypothetical Strike Value);
|
|
·
|
a Buffer Amount of 20.00%;
|
|
·
|
a Downside Leverage Factor of 1.25; and
|
|
·
|
the Call Premium Amounts are equal to the minimum Call Premium Amounts set forth under “Key Terms — Call Premium
Amount” above.
|
The hypothetical Strike Value of the Lesser Performing
Underlying of 100.00 has been chosen for illustrative purposes only and does not represent the actual Strike Value of either Underlying. The
actual Strike Value of each Underlying is the closing value of that Underlying on the Strike Date and is specified under “Key
Terms — Strike Value” in this pricing supplement. For historical data regarding the actual closing values
of each Underlying, please see the historical information set forth under “The Underlyings” 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 Value of Lesser Performing Underlying
|
|
First Review Date
|
110.00
|
Notes are automatically called
|
|
Total Payment
|
$1,090.00 (9.00% return)
|
Because the closing value of each Underlying
on the first Review Date is greater than or equal to its Call Value, the notes will be automatically called for a cash payment,
for each $1,000 principal amount note, of $1,090.00 (or $1,000
plus
the Call Premium Amount applicable to the first Review
Date), payable on the applicable Call Settlement Date. No further payments will be made on the notes.
Example 2 — Notes are automatically
called on the final Review Date.
Date
|
Closing Value of Lesser Performing Underlying
|
|
First Review Date
|
90.00
|
Notes NOT automatically called
|
Final Review Date
|
120.00
|
Notes are automatically called
|
|
Total Payment
|
$1,135.00 (13.50% return)
|
Because the closing value of each Underlying
on the final Review Date is greater than or equal to its Call Value, the notes will be automatically called for a cash payment,
for each $1,000 principal amount note, of $1,135.00 (or $1,000
plus
the Call Premium Amount applicable to the final Review
Date), payable on the applicable Call Settlement Date, which is the Maturity Date.
Example 3 — Notes have NOT been automatically
called and the Final Value of the Lesser Performing Underlying is less than its Strike Value by up to the Buffer Amount.
Date
|
Closing Value of Lesser Performing Underlying
|
|
First Review Date
|
90.00
|
Notes NOT automatically called
|
Final Review Date
|
80.00
|
Notes NOT automatically called; Final Value of Lesser Performing
|
PS-
3
| Structured Investments
Review Notes Linked to the Lesser Performing of the Russell 2000
®
Index and the iShares
®
MSCI EAFE ETF
|
|
|
|
Underlying is less than its Strike Value by up to the Buffer Amount
|
|
Total Payment
|
$1,070.00 (7.00% return)
|
Because the notes have not been automatically
called and the Final Value of the Lesser Performing Underlying is less than its Strike Value by up to the Buffer Amount, the payment
at maturity, for each $1,000 principal amount note, will be $1,070.00, calculated as follows:
$1,000 + ($1,000 × 7.00%) = $1,070.00
Example 4 — Notes have NOT been automatically
called and the Final Value of the Lesser Performing Underlying is less than its Strike Value by more than the Buffer Amount.
Date
|
Closing Value of Lesser Performing Underlying
|
|
First Review Date
|
80.00
|
Notes NOT automatically called
|
Final Review Date
|
40.00
|
Notes NOT automatically called; Final Value of Lesser Performing Underlying is less than its Strike Value by more than the Buffer Amount
|
|
Total Payment
|
$500.00 (-50.00% return)
|
Because the notes have not been automatically
called, the Final Value of the Lesser Performing Underlying is less than its Strike Value by more than the Buffer Amount and the
Lesser Performing Underlying Return is -60.00%, the payment at maturity will be $500.00 per $1,000 principal amount note, calculated
as follows:
$1,000 + [$1,000 × (-60.00% + 20.00%) ×
1.25] = $500.00
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.
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 notes have not been automatically called and the Final Value of either Underlying is less than
its Strike Value by more than the Buffer Amount, you will 1.25% of the principal amount of your notes for every 1% that the Final
Value of the Lesser Performing Underlying is less than its Strike Value by more than the Buffer Amount. Accordingly,
under these circumstances, you will lose some or all of your principal amount at maturity and could lose all of your principal
amount at maturity.
|
·
|
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.
PS-
4
| Structured Investments
Review Notes Linked to the Lesser Performing of the Russell 2000
®
Index and the iShares
®
MSCI EAFE ETF
|
|
|
·
|
THE APPRECIATION POTENTIAL OF THE NOTES IS LIMITED TO ANY CALL PREMIUM AMOUNT PAID ON THE NOTES IF THE NOTES ARE AUTOMATICALLY
CALLED,
|
regardless of any appreciation in
the value of either Underlying, which may be significant. You will not participate in any appreciation in the value
of either Underlying.
|
·
|
YOUR ABILITY TO RECEIVE THE CONTINGENT MINIMUM RETURN MAY TERMINATE ON THE FINAL REVIEW DATE IF THE NOTES HAVE NOT BEEN AUTOMATICALLY
CALLED
—
|
If the notes have not been automatically
called and the Final Value of either Underlying is less than its Strike Value by more than the Buffer Amount, you will not be entitled
to receive the Contingent Minimum Return at maturity. Under these circumstances, you may lose some or all of your principal
amount at maturity.
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 VALUE OF EACH UNDERLYING —
|
Payments on the notes are not linked
to a basket composed of the Underlyings and are contingent upon the performance of each individual Underlying. Poor
performance by either of the Underlyings over the term of the notes may result in the notes not being automatically called on a
Review Date, may negatively affect your payment at maturity and will not be offset or mitigated by positive performance by the
other Underlying.
|
·
|
YOUR PAYMENT AT MATURITY WILL BE DETERMINED BY THE LESSER PERFORMING UNDERLYING.
|
|
·
|
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 one year. There is no guarantee that you would be
able to reinvest the proceeds from an investment in the notes at a comparable return 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 THE FUND OR THE SECURITIES INCLUDED IN OR HELD BY EITHER UNDERLYING OR HAVE ANY RIGHTS WITH
RESPECT TO THE FUND OR THOSE SECURITIES.
|
|
·
|
AN INVESTMENT IN THE NOTES IS SUBJECT TO RISKS ASSOCIATED WITH SMALL CAPITALIZATION STOCKS WITH RESPECT TO THE 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.
|
·
|
THERE ARE RISKS ASSOCIATED WITH THE FUND —
|
The Fund is subject to management
risk, which is the risk that the investment strategies of the Fund’s investment adviser, the implementation of which is subject
to a number of constraints, may not produce the intended results. These constraints could adversely affect the market
price of the shares of the Fund and, consequently, the value of the notes.
|
·
|
THE PERFORMANCE AND MARKET VALUE OF THE FUND, PARTICULARLY DURING PERIODS OF MARKET VOLATILITY, MAY NOT CORRELATE WITH THE
PERFORMANCE OF THE FUND’S UNDERLYING INDEX AS WELL AS THE NET ASSET VALUE PER SHARE —
|
The Fund does not fully replicate
its Underlying Index (as defined under “The Underlyings” below) and may hold securities different from those included
in its Underlying Index. In addition, the performance of the Fund will reflect additional transaction costs and fees
that are not included in the calculation of its Underlying Index. All of these factors may lead to a lack of correlation
between the performance of the Fund and its Underlying Index. In addition, corporate actions with respect to the equity
securities underlying the Fund (such as mergers and spin-offs) may impact the variance between the performances of the Fund and
its Underlying Index. Finally, because the shares of the Fund are traded on a securities exchange and are subject to
market supply and investor demand, the market value of one share of the Fund may differ from the net asset value per share of the
Fund.
PS-
5
| Structured Investments
Review Notes Linked to the Lesser Performing of the Russell 2000
®
Index and the iShares
®
MSCI EAFE ETF
|
|
During periods of market volatility,
securities underlying the Fund may be unavailable in the secondary market, market participants may be unable to calculate accurately
the net asset value per share of the Fund and the liquidity of the Fund may be adversely affected. This kind of market
volatility may also disrupt the ability of market participants to create and redeem shares of the Fund. Further, market
volatility may adversely affect, sometimes materially, the prices at which market participants are willing to buy and sell shares
of the Fund. As a result, under these circumstances, the market value of shares of the Fund may vary substantially from
the net asset value per share of the Fund. For all of the foregoing reasons, the performance of the Fund may not correlate
with the performance of its Underlying Index as well as the net asset value per share of the Fund, which could materially and adversely
affect the value of the notes in the secondary market and/or reduce any payment on the notes.
|
·
|
NON-U.S. SECURITIES RISK WITH RESPECT TO THE FUND —
|
The
equity securities held by the Fund 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.
|
·
|
THE NOTES ARE SUBJECT TO CURRENCY EXCHANGE RISK WITH RESPECT TO THE FUND —
|
Because the prices of the equity securities
held by the Fund are converted into U.S. dollars for purposes of calculating the net asset value of the Fund, holders of the notes
will be exposed to currency exchange rate risk with respect to each of the currencies in which the equity securities held by the
Fund trade. Your net exposure will depend on the extent to which those currencies strengthen or weaken against the U.S.
dollar and the relative weight of equity securities held by a Fund denominated in each of those currencies. If, taking
into account the relevant weighting, the U.S. dollar strengthens against those currencies, the price of a Fund will be adversely
affected and any payment on the notes may be reduced.
|
·
|
THE ANTI-DILUTION PROTECTION FOR THE FUND IS LIMITED —
|
The calculation agent will make adjustments
to the Share Adjustment Factor for certain events affecting the shares of the Fund. However, the calculation agent will
not make an adjustment in response to all events that could affect the shares of the Fund. If an event occurs that does
not require the calculation agent to make an adjustment, the value of the notes may be materially and adversely affected.
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 Call Premium Amounts.
|
·
|
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.
|
·
|
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.
PS-
6
| Structured Investments
Review Notes Linked to the Lesser Performing of the Russell 2000
®
Index and the iShares
®
MSCI EAFE ETF
|
|
|
·
|
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 values of the Underlyings. 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.
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The
Underlyings
The 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 Index is designed to
track the performance of the small capitalization segment of the U.S. equity market. For additional information about
the Index, see “Equity Index Descriptions — The Russell Indices” in the accompanying underlying supplement.
The Fund is
an exchange-traded fund of iShares
®
Trust, a registered investment company, that seeks to track the investment results,
before fees and expenses, of an index composed of large- and mid-capitalization developed market equities, excluding the United
States and Canada, which we refer to as the Underlying Index with respect to the Fund. The Underlying Index for the
Fund is currently the MSCI EAFE
®
Index. The MSCI EAFE
®
Index is a free float-adjusted
market capitalization index intended to measure the equity market performance of the developed equity markets in Europe, Asia,
Australia and New Zealand. For additional information about the Fund, see “Fund Descriptions — The iShares
®
ETFs” in the accompanying underlying supplement.
Historical Information
The following graphs set forth the historical
performance of each Underlying based on the weekly historical closing values from January 6, 2012 through March 17, 2017. The
closing value of the Index on March 22, 2017 was 1,345.598. The closing value of the Fund on March 22, 2017 was $61.83. We
obtained the closing values above and below from the Bloomberg Professional
®
service (“Bloomberg”),
without independent verification. The closing values of the Fund above and below may have been adjusted by Bloomberg
for actions taken by the Fund, such as stock splits.
The historical closing values of each Underlying
should not be taken as an indication of future performance, and no assurance can be given as to the closing value of either Underlying
on any Review Date. There can be no assurance that the performance of the Underlyings will result in the return of any
of your principal amount.
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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. 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 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.
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.
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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. Under a recent IRS notice, withholding under FATCA will not apply to payments of gross proceeds (other
than any amount treated as interest) of a taxable disposition, including an automatic call or redemption at maturity, of the notes.
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, 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.
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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 Underlyings” 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.
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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