The Financial Services Authority said the size of the fine should send out a strong message to firms to take more care with clients’ money, warning that it has more cases in the pipeline.
The regulator said that J.P. Morgan Securities failed to segregate the client money held by its futures and options business with JPMorgan Chase Bank N.A. for more than six years between November 2002 and July 2009.
Instead of being held overnight in a segregated money market account, J.P. Morgan Securities’ client money was mistakenly held in an unsegregated account with JPMorgan Chase.
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 to protect the client funds if the firm goes bankrupt. “The FSA has repeatedly emphasized the importance of ensuring that client money is adequately protected,” said Margaret Cole, the FSA’s director of enforcement and financial crime. “Despite being one of the largest holders of client money in the U.K., JPMSL, failed to do so.”
J.P. Morgan’s penalty would have been even higher, except it qualified for a 30 percent discount after agreeing to an early settlement with the regulator. The FSA said the penalty also reflected the amount of client money involved. It is equivalent to 1 percent of the average amount of unsegregated client money held by J.P. Morgan Securities with JPMorgan Chase.
