JPMorgan Securities receives record fine from FSA

4 June 2010

The Financial Services Authority (FSA) has issued JPMorgan Securities (JPMSL) with a record fine for putting clients at risk by failing to keep their funds segregated.

JPMSL has received a penalty of £33.32 million from the industry regulator for its inability to maintain client funds appropriately.

The accounts and assets were maintained by Futures and Options (F&O) division of JPMorgan Chase Bank NA (JPMCB).

Between 2002 and 2009, the balance of client funds held by F&O fluctuated between $1.9 billion and $23 billion.

If the firm had collapsed during this period, then clients were at risk of losing their money due to the lack of segregation surrounding the funds, the FSA explained.

Margaret Cole, FSA director of enforcement and financial crime, said: “JPMSL committed a serious breach of our client money rules by failing to segregate billions of dollars of its clients' money for nearly seven years. The penalty reflects the amount of client money involved in this breach.”

She added that the case sends out a strong message to firms of the importance of segregation before warning of “several more cases in the pipeline".

The FSA has subsequently created the Client Assets specialist unit to enhance its supervision of firms working with customer funds.

JPMSL’s fine was reduced by 30 per cent due to its willingness to cooperate with the regulator as part of the investigation.

By Jim Ottewill

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