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.”