FSA fines JPMorgan record US$49m
By Jane Wardell |
June 4, 2010, Friday
|
Print Edition
Print Edition
JPMORGAN Securities Ltd was fined a record 33.32 million pounds (US$49 million) yesterday for mishandling clients' funds, the largest penalty handed out by Britain's financial services watchdog.
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 JPMorgan 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, JPMorgan 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."
The FSA said the penalty also reflected the amount of client money involved.
During the period in question, the client money balance held by the futures and options business of JPMorgan Securities varied from US$1.9 billion to US$23 billion. Had the firm become insolvent at any time during this period, that client money could have been lost.
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 JPMorgan 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, JPMorgan 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."
The FSA said the penalty also reflected the amount of client money involved.
During the period in question, the client money balance held by the futures and options business of JPMorgan Securities varied from US$1.9 billion to US$23 billion. Had the firm become insolvent at any time during this period, that client money could have been lost.
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