JP Morgan slapped record £33.32 million fine in UK
03 June 2010
JP Morgan, the US-based investment banking giant, has been fined a record £33.32 million by the UK regulator for failing to keep billions of dollars of client money separate from the firm's money, in segregated accounts.
The £33.32 million fine imposed by the Financial Services Authority (FSA) on JP Morgan Securities is the largest-ever fine imposed by the regulator, surpassing the 2004 penalty of £17 million levied on oil major Royal Dutch Shell for market abuse.
The FSA said the problem occurred between November 2002 and July 2009, following the merger of JP Morgan and Chase in 2000, where JP Morgan Securities failed to segregate client money held by its futures and options business (F&O) with JP Morgan Chase Bank.
Instead of being held overnight in a segregated money market account, JP Morgan Securities' F&O client money was held in an unsegregated account with JP Morgan Chase Bank, and the error remained undetected for nearly seven years.
During this period, the client money balance held by the F&O business of JP Morgan Securities varied between $1.9 billion and $23 billion "Had the firm become insolvent at any time during this period, this client money would have been at risk of loss," the FSA said.
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. This helps to protect client money in the event of the firm's insolvency.
"JP Morgan Securities 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," Margaret Cole, FSA director of enforcement and financial crime, said.