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FCA fines JP Morgan International Bank £3.1m for wealth management failings

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The Financial Conduct Authority has fined JP Morgan International Bank £3,076,200 for systems and controls failings relating to its retail investment advice and portfolio investment services.

The fine follows the regulator’s thematic review into wealth management firms and the suitability of their advice. JP Morgan is now carrying out a past business review to assess investment suitability.

The FCA says over a two-year period JP Morgan’s senior management failed to address that it was unable to demonstrate advice suitability from its client files.

It says while no customer detriment has been found to date, the failings exposed customers to the risk they would be recommended inappropriate investments.

It found client files were not kept up to date and failed to record information such as client objectives, capacity for loss and investment experience.

JP Morgan’s computer-based system did not allow enough information to be kept on file. Suitability reports failed to explain why investments were suitable and explain their disadvantages.

The company also failed to follow its own policy to send clients details of their risk profiles.

The regulator says JP Morgan did not have adequate risk and compliance monitoring in place, and issues that were picked up were not adequately addressed until after February 2012.

JP Morgan was told by the FCA to carry out a skilled person’s report, and has since overhauled its suitability processes.

FCA director of enforcement and financial crime Tracey McDermott says: “Customers of wealth managers should be able to expect the firm to keep complete, up to date client records so they can give the right advice.  

“In this case the firm did not have complete records, nor did its management have the information they needed to recognize this.

“Firms which fail to keep the right records expose their clients to the risk of inappropriate investments and have no way of checking whether their advice has been appropriate.”

The fine against JP Morgan follows Ashcourt Rowan’s £412,000 FSA fine in November for suitability failures of its Savoy Investment Management business. Ashcourt Rowan’s fine was also triggered by the regulator’s thematic review into wealth management firms. 

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