Belfast Telegraph

Huge fine for JP Morgan

Bank hit with record £33m bill for failing to protect client cash

By Holly Williams

Investment banking giant JP Morgan has been fined a record £33.3m over its failure to ring-fence billions of pounds of client money.

The fine — the largest ever imposed by the UK’s Financial Services Authority (FSA) — was imposed after JP Morgan failed to segregate client cash from its own money during a period that spanned nearly seven years.

The FSA said if JP Morgan Securities Ltd (JPMSL) had become insolvent during this time, substantial amounts of client money would have been at risk of loss.

Its fine represented 1% of the average amount of money lumped together, according to the FSA.

Under the City watchdog’s rules, banks and financial companies must keep customers’ money in separate accounts to protect it in case the company fails.

“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,” said Margaret Cole, FSA director of enforcement and financial crime.

“The FSA has repeatedly emphasised the importance of ensuring that client money is adequately protected. Despite being one of the largest holders of client money in the UK, JPMSL failed to do so.

“This penalty sends out a strong message to firms of all sizes that they must ensure client money is segregated in accordance with FSA rules. Firms need to sit up and take notice of this action — we have several more cases in the pipeline.”

In working out the level of the penalty the FSA took into account that the misconduct was not deliberate and that the firm reported the breach as soon as it was discovered, which meant the bank had received a 30% discount on the fine.

Sally Dewar, FSA managing director of risk, added: “It is crucial that firms are compliant with the FSA’s client money and assets rules. Adhering to these rules not only ensures greater protection of clients but of financial stability as a whole.

“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.”

Meanwhile the FSA suffered a setback in its attempt to secure a string of convictions for insider dealing after two lawyers, Michael McFall and Andrew Rimmington, and a former finance director, Andrew King, were acquitted.

Belfast Telegraph