FSA fines JP Morgan £33.32m
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JP Morgan Securities has been fined a record £33.32m by the FSA for failing to protect client money.
The FSA has revealed it has handed out its largest ever fine to a financial services firm after JP Morgan Securities was found to have failed to segregate billions of dollars of client money from money held by JP Morgan Chase bank. The FSA says this error remained undetected for seven years.
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. But between November 2002 and July 2009, JP Morgan Securities failed to do this and allowed its futures and options business to hold between $1.9bn and $23bn of client money. The FSA says if JP Morgan Securities had become insolvent during this time the money could have been lost.
FSA director of enforcement and financial crime Margaret Cole says the large fine reflects the large amounts of money put at risk by the investment bank. She says the regulator is working on more cases involving firms incorrectly segregating client money.
She says: “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, JP Morgan Securities 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.”
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Readers' comments (15)
Anonymous | 3 Jun 2010 11:32 am
So no client actually lost any money, then?
Never mind, at least the FSA is able to demonstrate to everyone that it has teeth, at a time when it's very future has been under threat - a coincidence or what?
And at least there will now be enougth money in the pot to pay the ridiculous bonuses of the top people at the FSA.
What a joke..."pigs", "snouts", and "trough" spring to mind. And guess what? they think there may be other troughs around.
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Anonymous | 3 Jun 2010 11:32 am
Why doesn't somebody else with a higher power go into the FSA and weed out the idiots who failed to spot this for the last 7 years. Perhaps with a fine like this we might get our keydata levy back or a reduction in the forthcoming fees that will no doubt be increased as I suspect that the FSA coffers are swelling at present - or will it pay for some more jolly boys outings for the FSA
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Anonymous | 3 Jun 2010 11:35 am
The fine is insignificant compared to the money that JP Morgan would have made out of this practice.
Yet again the FSA have proven themselves to be totally ineffective.
JP Morgan will be celebrating tonight!
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M J Winfield | 3 Jun 2010 11:35 am
A totally ridiculous fine to J P Morgan, as no clients money was lost.
The penalty is therefore more to do with the fact that the FSA had failed to do its job properly for seven years, so who will pay the price at the FSA certainly not the ghost regulator of the past or future.
Another possible cause for such a large fine, is it helps to fund expansion of the gravy train and it will certainly suggest to the politicians that the FSA is doing a wonderful job.
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Anonymous | 3 Jun 2010 11:42 am
Where were the auditors? Do they not have a responsibility whilst conducting an audit.The FSA should have a team based at the bank and should be remunerated by the bank.
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Anonymous | 3 Jun 2010 11:45 am
I suppose the FSA have to do this so that they can pay their little darlings who 'earn' over £100,000per annum.
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Anonymous | 3 Jun 2010 11:55 am
This error remained undetected by the "FSA" for seven years. Of course a firm of this size had annual FSA audit so who fines the FSA for failing seven times!
This just goes to show what a waste of time and money the FSA is. Come on Conservative bin them and save us some money!
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AJ, Glasgow | 3 Jun 2010 11:57 am
Interesting stuff... it appears that the Compliance staff spotted it one day, confirmed it the next, solved the issue the next day and then told the FSA. This is a very serious breach but it seems that the people who knew what they were doing in the firm stopped a much bigger fine.
To be fair, this would have been difficult for the FSA to spot without the micro-scrutiny the industry wouldn't be happy with. However the point made about the auditor is totally fair. Their job is to look through all the money and make sure it was handled properly and they don't seem to have done this.
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Anonymous | 3 Jun 2010 12:10 pm
My admiration for the FSA continues to grow. They are better at making money than BP. However, isn't it part of their remit to encourage consumer confidence in financial services rather than repeated failures to prevent banks from taking their customers for a ride? As I continue to pay a levy of over £40 per week for FSA failures, once again a horse has bolted and probably died of old age before they noticed it was missing!
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TERRY | 3 Jun 2010 12:14 pm
What are the 3000 plus people employed by the FSA doing all day to miss something like this that has been going on all through the FSA reign of terror on the small IFA. Of course they are very busy deauthorising the small person who because they cannot afford to pay the £1500 of fees due to the recession and the continued increased costs of the FSA and FSCS.
Someone in authority in the government need to grab tthe FSA by the neck and bring them down to earth. there will at this rate be no financial services industry in years to come the FSA will have decimated it one way or the other
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