The
Financial Services Authority said the size of the fine should send out a
strong message to firms to take more care with clients’ money, warning
that it has more cases in the pipeline.The regulator said that JP
Morgan Securities failed to segregate the client money held by its
futures and options business with JPMorgan Chase Bank N.A. for more than
six years between November 2002 and July 2009.Instead of being held
overnight in a segregated money market account, JP Morgan Securities’
client money was mistakenly held in an unsegregated account with
JPMorgan Chase.Under the FSA’s client money rules, firms are
required to keep client money separate from the firm’s money in
segregated accounts with trust status to protect the client funds if the
firm goes bankrupt.“The FSA has repeatedly emphasized the
importance of ensuring that client money is adequately protected,” said
Margaret Cole, the FSA’s director of enforcement and financial crime.
“Despite being one of the largest holders of client money in the UK,
JPMSL, failed to do so.”“Firms need to sit up and take notice of
this action — we have several more cases in the pipeline,” she added.JP
Morgan’s penalty would have been even higher, except it qualified for a
30 percent discount after agreeing to an early settlement with the
regulator.The FSA said the penalty also reflected the amount of
client money involved. It is equivalent to 1 percent of the average
amount of unsegregated client money held by JP Morgan Securities with
JPMorgan Chase.During the period in question, the client money
balance held by the futures and options business of JP Morgan Securities
varied between $1.9 billion and $23 billion. Had the firm become
insolvent at any time during this period, that client money could have
been lost.However, the FSA said it also took into account the fact
that the misconduct was not deliberate and JP Morgan reported itself to
regulators and took immediate action to remedy the situation. No clients
suffered any losses and there was no incorrect financial reporting
during the 2001-2008 period.
