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 23, 2017
April , 2017
|
Registration Statement Nos. 333-209682 and 333-209682-01; Rule 424(b)(2)
|
JPMorgan Chase Financial
Company LLC
Structured Investments
|
|
Auto Callable Yield Notes Linked to the
Common Stock of Dick’s Sporting Goods, Inc. due July 18, 2018
Fully and Unconditionally Guaranteed by
JPMorgan Chase & Co.
|
·
|
The notes are designed for investors who seek a higher interest rate than either the current dividend yield on the Reference
Stock or the yield on a conventional debt security with the same maturity issued by us. The notes will pay at least 9.00% per annum
interest over the term of the notes, assuming no automatic call, payable at a rate of at least 0.75% per month.
|
|
·
|
The notes will be automatically called if the closing price of one share of the Reference Stock on any Review Date (other than
the final Review Date) is greater than or equal to the Initial Value.
|
|
·
|
The earliest date on which an automatic call may be initiated is October 16, 2017.
|
|
·
|
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.
|
|
·
|
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 April 13, 2017 and are expected to settle on or about April 19, 2017.
|
Investing in the notes involves a number of risks. See “Risk
Factors” beginning on page PS-10 of the accompanying product supplement and “Selected Risk Considerations” beginning
on page PS-5 of this pricing supplement.
Neither the Securities and Exchange Commission (the “SEC”)
nor any state securities commission has approved or disapproved of the notes or passed upon the accuracy or the adequacy of this
pricing supplement or the accompanying product supplement, prospectus supplement and prospectus. Any representation to the contrary
is a criminal offense.
|
Price to Public (1)
|
Fees and Commissions (2)
|
Proceeds to Issuer
|
Per note
|
$1,000
|
$
|
$
|
Total
|
$
|
$
|
$
|
(1) See “Supplemental Use of Proceeds”
in this pricing supplement for information about the components of the price to public of the notes.
(2) J.P. Morgan Securities LLC, which
we refer to as JPMS, acting as agent for JPMorgan Financial, will pay all of the selling commissions it receives from us to other
affiliated or unaffiliated dealers. If the notes priced today, the selling commissions would be approximately $15.00 per $1,000
principal amount note and in no event will these selling commissions exceed $17.50 per $1,000 principal amount note. See “Plan
of Distribution (Conflicts of Interest)” in the accompanying product supplement.
|
If the notes priced today, the estimated value of the notes
would be approximately $957.70 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 $940.00 per $1,000 principal amount note. See “The
Estimated Value of the Notes” in this pricing supplement for additional information.
The notes are not bank deposits, are not insured by the Federal
Deposit Insurance Corporation or any other governmental agency and are not obligations of, or guaranteed by, a bank.
Pricing supplement to product supplement no. 4-I dated April 15, 2016
and the prospectus and prospectus supplement, each dated April 15, 2016
Key
Terms
Issuer:
JPMorgan Chase Financial Company LLC
Guarantor:
JPMorgan Chase & Co.
Reference
Stock:
The common stock of Dick’s Sporting Goods, Inc., par value $0.01 per share
(Bloomberg ticker: DKS). We refer to Dick’s Sporting Goods, Inc. as “Dick’s Sporting Goods.”
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 $7.50 (equivalent to an Interest Rate of at least 9.00% per annum,
payable at a rate of at least 0.75% per month) (to be provided in the pricing supplement).
Interest
Rate:
At least 9.00% per annum, payable at a rate of at least 0.75% per month (to be
provided in the pricing supplement)
Trigger Value:
65.00%
of the Initial Value
Pricing
Date:
On or about April 13, 2017
Original
Issue Date (Settlement Date):
On or about April 19, 2017
Review
Dates*:
October 16, 2017, January 16, 2018, April 16, 2018 and July 13, 2018 (final
Review Date)
Interest
Payment Dates*:
May 18, 2017, June 20, 2017, July 20, 2017, August 18, 2017, September 20, 2017, October 19, 2017, November
20, 2017, December 20, 2017, January 19, 2018, February 21, 2018, March 20, 2018, April 19, 2018, May 18, 2018, June 20, 2018 and
the Maturity Date
Maturity
Date*:
July 18, 2018
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 a Single Underlying — Notes Linked to a Single Underlying (Other Than a Commodity Index)” and “General
Terms of Notes — Postponement of a Payment Date” in the accompanying product supplement
|
Automatic Call:
If the closing price of one share of the Reference Stock on any
Review Date (other than the final Review Date) is greater than or equal to the 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 is greater than or equal to the 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 is less than the 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 × Stock Return)
If the notes have not been automatically called and (i) the
Final Value is less than the Initial Value and (ii) a Trigger Event has occurred, you will lose some or all of your principal amount
at maturity.
Trigger Event:
A Trigger
Event occurs if, on any day during the Monitoring Period, the closing price of one share of the Reference Stock is less than the
Trigger Value.
Monitoring Period:
The period from but excluding the Pricing Date to and including the final Review Date
Stock Return:
(Final Value – Initial Value)
Initial Value
Initial
Value:
The closing price of one share of the Reference Stock on the Pricing Date
Final
Value:
The closing price of one share of the Reference Stock on the final Review Date
Stock
Adjustment Factor:
The Stock Adjustment Factor is referenced in determining the closing price of one share of the Reference
Stock and is set equal to 1.0 on the Pricing Date. The Stock Adjustment Factor is subject to adjustment upon the occurrence of
certain corporate events affecting the Reference Stock. See “The Underlyings — Reference Stocks — Anti-Dilution
Adjustments” and “The Underlyings — Reference Stocks — Reorganization Events” in the accompanying
product supplement for further information.
|
PS-
1
| Structured Investments
Auto Callable Yield Notes Linked to the Common Stock of Dick’s Sporting Goods, Inc.
|
|
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 9.00%
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
9.00% per annum.
PS-
2
| Structured Investments
Auto Callable Yield Notes Linked to the Common Stock of Dick’s Sporting Goods, Inc.
|
|
Number of Interest Payments
|
Total Interest Payments
|
15
|
$112.50
|
12
|
$90.00
|
9
|
$67.50
|
6
|
$45.00
|
Hypothetical
Payout Examples
The following examples illustrate payments on
the notes linked to a hypothetical Reference Stock, assuming a range of performances for the hypothetical Reference Stock on the
Review Dates.
The hypothetical payments set forth below assume
the following:
|
·
|
an Initial Value of $100.00;
|
|
·
|
a Trigger Value of $65.00 (equal to 65.00% of the hypothetical Initial Value); and
|
|
·
|
an Interest Rate of 9.00% per annum (payable at a rate of 0.75% per month).
|
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 price of one share of the Reference Stock on the Pricing Date and will be provided in the pricing supplement. For historical
data regarding the actual closing prices of one share of the Reference Stock, please see the historical information set forth under
“The Reference Stock” 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 Price
|
|
First Review Date
|
$105.00
|
Notes are automatically called
|
|
Total Payment
|
$1,045.00 (4.50% return)
|
Because the closing price of one share of the Reference Stock
on the first Review Date is greater than or equal to the Initial Value, the notes will be automatically called for a cash payment,
for each $1,000 principal amount note, of $1,007.50 (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 $1,045.00. No further payments
will be made on the notes.
Example 2 — Notes have NOT been automatically
called, the Final Value is greater than or equal to the Initial Value and a Trigger Event has occurred.
Date
|
Closing Price
|
|
First Review Date
|
$95.00
|
Notes NOT automatically called
|
Second Review Date
|
$85.00
|
Notes NOT automatically called
|
Third Review Date
|
$80.00
|
Notes NOT automatically called
|
Final Review Date
|
$105.00
|
Final Value is greater than Initial Value
|
|
Total Payment
|
$1,112.50 (11.25% return)
|
Because the notes have not been automatically
called and the Final Value is greater than or equal to the Initial Value, even though a Trigger Event has occurred, the payment
at maturity, for each $1,000 principal amount note, will be $1,007.50 (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 $1,112.50.
Example 3 — Notes have NOT been automatically
called, the Final Value is less than the Initial Value and a Trigger Event has NOT occurred.
Date
|
Closing Price
|
|
First Review Date
|
$90.00
|
Notes NOT automatically called
|
Second Review Date
|
$80.00
|
Notes NOT automatically called
|
Third Review Date
|
$85.00
|
Notes NOT automatically called
|
PS-
3
| Structured Investments
Auto Callable Yield Notes Linked to the Common Stock of Dick’s Sporting Goods, Inc.
|
|
Final Review Date
|
$75.00
|
Final Value is less than Initial Value
|
|
Total Payment
|
$1,112.50 (11.25% return)
|
Because the notes have not been automatically
called and a Trigger Event has not occurred, even though the Final Value is less than the Initial Value, the payment at maturity,
for each $1,000 principal amount note, will be $1,007.50 (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 $1,112.50.
Example
4 — Notes have NOT been automatically called, the Final Value is less than the Initial Value and a Trigger Event has occurred
.
Date
|
Closing Price
|
|
First Review Date
|
$60.00
|
Notes NOT automatically called
|
Second Review Date
|
$55.00
|
Notes NOT automatically called
|
Third Review Date
|
$45.00
|
Notes NOT automatically called
|
Final Review Date
|
$50.00
|
Final Value is less than Initial Value
|
|
Total Payment
|
$612.50 (-38.75% return)
|
Because the notes have not been automatically
called, the Final Value is less than the Initial Value, a Trigger Event has occurred and the Stock Return is -50.00%, the payment
at maturity will be $507.50 per $1,000 principal amount note, calculated as follows:
$1,000 + [$1,000 × (-50.00%)] + $7.50 =
$507.50
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 $612.50.
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 Common Stock of Dick’s Sporting Goods, Inc.
|
|
Selected
Risk Considerations
An investment in the notes involves significant
risks. These risks are explained in more detail in the “Risk Factors” section of the accompanying product supplement.
|
·
|
YOUR INVESTMENT IN THE NOTES MAY RESULT IN A LOSS —
|
The notes do not guarantee any return
of principal. If the notes have not been automatically called and (i) the Final Value is less than the 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 is less than
the Initial Value. 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.
|
·
|
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 in
the price of one share of the Reference Stock, which may be significant. You will not participate in any appreciation in the price
of one share of the Reference Stock.
We and our affiliates play a variety
of roles in connection with the notes. In performing these duties, our and JPMorgan Chase & Co.’s economic interests
are potentially adverse to your interests as an investor in the notes. It is possible that hedging or trading activities of ours
or our affiliates in connection with the notes could result in substantial returns for us or our affiliates while the value of
the notes declines. Please refer to “Risk Factors — Risks Relating to Conflicts of Interest” in the accompanying
product supplement.
|
·
|
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 price of one share of the Reference Stock is less than the 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 in the closing price of one share of the Reference Stock. You will be subject to this potential loss
of principal even if the Reference Stock subsequently recovers such that the closing price of one share of the Reference Stock
is greater than or equal to the 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 approximately 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, 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 REFERENCE STOCK OR HAVE ANY RIGHTS WITH RESPECT TO THE REFERENCE STOCK.
|
|
·
|
NO AFFILIATION WITH THE REFERENCE STOCK ISSUER —
|
PS-
5
| Structured Investments
Auto Callable Yield Notes Linked to the Common Stock of Dick’s Sporting Goods, Inc.
|
|
We have not independently verified
any of the information about the Reference Stock issuer contained in this pricing supplement. You should undertake your own investigation
into the Reference Stock and its issuer. We are not responsible for the Reference Stock issuer’s public disclosure of information,
whether contained in SEC filings or otherwise.
|
·
|
THE ANTI-DILUTION PROTECTION FOR THE REFERENCE STOCK IS LIMITED AND MAY BE DISCRETIONARY —
|
The calculation agent will not make
an adjustment in response to all events that could affect the Reference Stock. The calculation agent may make adjustments in response
to events that are not described in the accompanying product supplement to account for any diluting or concentrative effect, but
the calculation agent is under no obligation to do so or to consider your interests as a holder of the notes in making these determinations.
|
·
|
THE RISK OF THE CLOSING PRICE OF ONE SHARE OF THE REFERENCE STOCK FALLING BELOW THE TRIGGER VALUE IS GREATER IF THE PRICE
OF ONE SHARE OF THE REFERENCE STOCK IS VOLATILE.
|
The notes will not be listed on any
securities exchange. Accordingly, the price at which you may be able to trade your notes is likely to depend on the price, if any,
at which JPMS is willing to buy the notes. You may not be able to sell your notes. The notes are not designed to be short-term
trading instruments. Accordingly, you should be able and willing to hold your notes to maturity.
|
·
|
THE FINAL TERMS AND VALUATION OF THE NOTES WILL BE PROVIDED IN THE PRICING SUPPLEMENT —
|
You should consider your potential
investment in the notes based on the minimums for the estimated value of the notes and the Interest Rate.
|
·
|
THE ESTIMATED VALUE OF THE NOTES WILL BE LOWER THAN THE ORIGINAL ISSUE PRICE (PRICE TO PUBLIC) OF THE NOTES —
|
The estimated value of the notes is
only an estimate determined by reference to several factors. The original issue price of the notes will exceed the estimated value
of the notes because costs associated with selling, structuring and hedging the notes are included in the original issue price
of the notes. These costs include the selling commissions, the projected profits, if any, that our affiliates expect to realize
for assuming risks inherent in hedging our obligations under the notes and the estimated cost of hedging our obligations under
the notes. See “The Estimated Value of the Notes” in this pricing supplement.
|
·
|
THE ESTIMATED VALUE OF THE NOTES DOES NOT REPRESENT FUTURE VALUES OF THE NOTES AND MAY DIFFER FROM OTHERS’ ESTIMATES
—
|
See “The Estimated Value of
the Notes” in this pricing supplement.
|
·
|
THE ESTIMATED VALUE OF THE NOTES IS DERIVED BY REFERENCE TO AN INTERNAL FUNDING RATE —
|
The internal funding rate used in
the determination of the estimated value of the notes is based on, among other things, our and our affiliates’ view of the
funding value of the notes as well as the higher issuance, operational and ongoing liability management costs of the notes in comparison
to those costs for the conventional fixed-rate debt of JPMorgan Chase & Co. The use of an internal funding rate and any potential
changes to that rate may have an adverse effect on the terms of the notes and any secondary market prices of the notes. See “The
Estimated Value of the Notes” in this pricing supplement.
|
·
|
THE VALUE OF THE NOTES AS PUBLISHED BY JPMS (AND WHICH MAY BE REFLECTED ON CUSTOMER ACCOUNT STATEMENTS) MAY BE HIGHER THAN
THE THEN-CURRENT ESTIMATED VALUE OF THE NOTES FOR A LIMITED TIME PERIOD —
|
We generally expect that some of the
costs included in the original issue price of the notes will be partially paid back to you in connection with any repurchases of
your notes by JPMS in an amount that will decline to zero over an initial predetermined period. See “Secondary Market Prices
of the Notes” in this pricing supplement for additional information relating to this initial period. Accordingly, the estimated
value of your notes during this initial period may be lower than the value of the notes as published by JPMS (and which may be
shown on your customer account statements).
|
·
|
SECONDARY MARKET PRICES OF THE NOTES WILL LIKELY BE LOWER THAN THE ORIGINAL ISSUE PRICE OF THE NOTES —
|
Any secondary market prices of the
notes will likely be lower than the original issue price of the notes because, among other things, secondary market prices take
into account our internal secondary market funding rates for structured debt issuances and, also, because secondary market prices
(a) exclude selling commissions and (b) may exclude projected hedging profits, if any, and estimated hedging costs that are included
in the original issue price of the notes. As a result, the price, if any, at which JPMS will
PS-
6
| Structured Investments
Auto Callable Yield Notes Linked to the Common Stock of Dick’s Sporting Goods, Inc.
|
|
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 price of one share of the
Reference Stock. Additionally, independent pricing vendors and/or third party broker-dealers may publish a price for the notes,
which may also be reflected on customer account statements. This price may be different (higher or lower) than the price of the
notes, if any, at which JPMS may be willing to purchase your notes in the secondary market. See “Risk Factors — Risks
Relating to the Estimated Value and Secondary Market Prices of the Notes — Secondary market prices of the notes will be impacted
by many economic and market factors” in the accompanying product supplement.
PS-
7
| Structured Investments
Auto Callable Yield Notes Linked to the Common Stock of Dick’s Sporting Goods, Inc.
|
|
The
Reference Stock
All information contained herein on the Reference
Stock and on Dick’s Sporting Goods is derived from publicly available sources, without independent verification. According
to its publicly available filings with the SEC, Dick’s Sporting Goods is a sporting goods retailer offering an assortment
of sports equipment, apparel, footwear and accessories. The common stock of Dick’s Sporting Goods, par value $0.01 per share
(Bloomberg ticker: DKS), is registered under the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange
Act, and is listed on the New York Stock Exchange, which we refer to as the relevant exchange for purposes of Dick’s Sporting
Goods in the accompanying product supplement. Information provided to or filed with the SEC by Dick’s Sporting Goods pursuant
to the Exchange Act can be located by reference to SEC file number 001-34163, and can be accessed through www.sec.gov. We do not
make any representation that these publicly available documents are accurate or complete.
Historical Information
The following graph sets forth the historical
performance of the Reference Stock based on the weekly historical closing prices of one share of the Reference Stock from January
6, 2012 through March 17, 2017. The closing price of one share of the Reference Stock on March 23, 2017 was $47.39. We obtained
the closing prices above and below from the Bloomberg Professional
®
service (“Bloomberg”), without independent
verification. The closing prices below may have been adjusted by Bloomberg for corporate actions, such as stock splits, public
offerings, mergers and acquisitions, spin-offs, delistings and bankruptcy.
The historical closing prices of one share of
the Reference Stock should not be taken as an indication of future performance, and no assurance can be given as to the closing
price of one share of the Reference Stock on the Pricing Date or any Review Date. There can be no assurance that the performance
of the Reference Stock will result in the return of any of your principal amount.
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 Davis Polk & Wardwell 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 cash-settled
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 the principal amount (excluding accrued but unpaid interest), requires you to pay us an amount
equal to that difference 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,
and in particular in the subsection thereof entitled “— Notes with a Term of More than One Year.” 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 IRS or a
court may adopt, 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 on a number of issues, the most relevant of which for
investors in the notes are the character of income or loss
PS-
8
| Structured Investments
Auto Callable Yield Notes Linked to the Common Stock of Dick’s Sporting Goods, Inc.
|
|
(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. investors should be subject to withholding tax. 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.
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 March 23, 2017, we would have allocated approximately
18.44% of each Interest Payment to interest on the Deposit and the remainder 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.
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.
Withholding under legislation commonly referred
to as “FATCA” will apply to amounts treated as interest or other “fixed or determinable annual or periodical”
income (“FDAP Income”) for U.S. federal income tax purposes 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 FDAP Income) 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.
You should consult your tax adviser 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.
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.
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The estimated value of the notes does not represent
future values of the notes and may differ from others’ estimates. Different pricing models and assumptions could provide
valuations for the notes that are greater than or less than the estimated value of the notes. In addition, market conditions and
other relevant factors in the future may change, and any assumptions may prove to be incorrect. On future dates, the value of the
notes could change significantly based on, among other things, changes in market conditions, our or JPMorgan Chase & Co.’s
creditworthiness, interest rate movements and other relevant factors, which may impact the price, if any, at which JPMS would be
willing to buy notes from you in secondary market transactions.
The estimated value of the notes will be lower
than the original issue price of the notes because costs associated with selling, structuring and hedging the notes are included
in the original issue price of the notes. These costs include the selling commissions paid to JPMS and other affiliated or unaffiliated
dealers, the projected profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging our obligations
under the notes and the estimated cost of hedging our obligations under the notes. Because hedging our obligations entails risk
and may be influenced by market forces beyond our control, this hedging may result in a profit that is more or less than expected,
or it may result in a loss. A portion of the profits, if any, realized in hedging our obligations under the notes may be allowed
to other affiliated or unaffiliated dealers, and we or one or more of our affiliates will retain any remaining hedging profits.
See “Selected Risk Considerations — The Estimated Value of the Notes Will Be Lower Than the Original Issue Price (Price
to Public) of the Notes” in this pricing supplement.
Secondary
Market Prices of the Notes
For information about factors that will impact
any secondary market prices of the notes, see “Risk Factors — Risks Relating to the Estimated Value and Secondary Market
Prices of the Notes — Secondary market prices of the notes will be impacted by many economic and market factors” in
the accompanying product supplement. In addition, we generally expect that some of the costs included in the original issue price
of the notes will be partially paid back to you in connection with any repurchases of your notes by JPMS in an amount that will
decline to zero over an initial predetermined period. These costs can include projected hedging profits, if any, and, in some circumstances,
estimated hedging costs and our internal secondary market funding rates for structured debt issuances. This initial predetermined
time period is intended to be the shorter of six months and one-half of the stated term of the notes. The length of any such initial
period reflects the structure of the notes, whether our affiliates expect to earn a profit in connection with our hedging activities,
the estimated costs of hedging the notes and when these costs are incurred, as determined by our affiliates. See “Selected
Risk Considerations — The Value of the Notes as Published by JPMS (and Which May Be Reflected on Customer Account Statements)
May Be Higher Than the Then-Current Estimated Value of the Notes for a Limited Time Period” in this pricing supplement.
Supplemental
Use of Proceeds
The notes are offered to meet investor demand
for products that reflect the risk-return profile and market exposure provided by the notes. See “How the Notes Work”
and “Hypothetical Payout Examples” in this pricing supplement for an illustration of the risk-return profile of the
notes and “The Reference Stock” 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. This
pricing supplement, together with the documents listed below, contains the terms of the notes and supersedes all other prior or
contemporaneous oral statements as well as any other written materials including preliminary or indicative pricing terms, correspondence,
trade ideas, structures for implementation, sample structures, fact sheets, brochures or other educational materials of ours. You
should carefully consider, among other things, the matters set forth in the “Risk Factors” section of the accompanying
product supplement, as the notes involve risks not associated with conventional debt securities. We urge you to consult your investment,
legal, tax, accounting and other advisers before you invest in the notes.
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Auto Callable Yield Notes Linked to the Common Stock of Dick’s Sporting Goods, Inc.
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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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Auto Callable Yield Notes Linked to the Common Stock of Dick’s Sporting Goods, Inc.
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