JPM: JPMorgan Fined Record $49 Million for Failing to Isolate U.K. Client Cash
By Caroline Binham
June 3 (Bloomberg) -- JPMorgan Chase & Co.’s London unit was fined a record 33.3 million pounds ($48.9 million) by Britain’s financial regulator for not properly separating client money from the firm’s accounts.
An average of $8.6 billion wasn’t properly segregated by JPMorgan Securities Ltd. in an error that went undetected for seven years, the Financial Services Authority said in a statement today. Client money held by the bank’s futures and options business wasn’t put in a separate overnight customer account, the FSA said.
The bankruptcy of Lehman Brothers Holdings Inc., which roiled financial markets worldwide in 2008, forced the regulator to put financial companies on notice that they must properly separate client funds. New York-based Lehman’s creditors filed more than $830 billion of claims and regulators worldwide are trying to unravel how money moved through its global units.
“The FSA has repeatedly emphasized the importance of ensuring that client money is adequately protected,” said Margaret Cole, the FSA Enforcement Director. “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.”
Had the company gone bankrupt, clients could have lost all their money, according to the regulator.
Reduced Fine
JPMorgan spokesman David Wells declined to comment. The New York-based bank escaped a 47.6 million-pound fine by cooperating with the regulator, according to the FSA’s statement. No clients lost money, and the mistake didn’t affect the bank’s financial reporting, the FSA said.
The fine is nearly twice as much the 17 million-pound fine levied against Royal Dutch Shell Plc in 2004 for market abuse.
The 33.3 million pounds represents 1 percent of the average amount of client money that wasn’t properly separated, according to the regulator’s statement. The agency has said fines will increase as part of its new tougher approach following the financial crisis. In some cases, penalty size will triple.
To contact the reporters on this story: Caroline Binham in London at cbinham@bloomberg.net
Last Updated: June 3, 2010 06:04 EDT
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