Financial Services Authority (FSA) has fined GBP33.32m on JP Morgan Securities Ltd (JPMSL) for failing to safeguard client money by segregating it appropriately. The regulator offered 30% discount following JPMSL's cooperation during the investigation, and to settle the issue at an early stage.
Reportedly, JPMSL failed to separate the client money held by its futures and options business (F&O) with JP Morgan Chase Bank (JPMCB) during November 1, 2002 and July 8, 2009.
FSA has said that the error occurred following the merger of JP Morgan and Chase. Instead of being held overnight in a segregated money market account, JPMSL’s F&O client money was held in an unsegregated account with JPMCB.
During this period, the client money balance held by the F&O business of JPMSL varied between $1.9bn (in December 2002) and $23bn (in October 2008).
The size of the penalty is equivalent to 1% of the average amount of unsegregated client money held by JPMSL with JP Morgan Chase Bank (JPMCB).
Margaret Cole, director of enforcement and financial crime at FSA, 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.”
Additionally, FSA has established a new unit to enhance and strengthen its existing capabilities in the area of client money and assets. The unit consists of teams responsible for specialist supervision, policy, data analysis and risk management.
Sally Dewar, managing director of risk at FSA, said: “It is crucial that firms are compliant with the FSA’s client money and assets rules. The creation of a specific unit means that firms need to raise their game as the FSA’s focus on this area and will continue to intensify.”