JP Morgan unit hit with record fine by British regulator
Britain's financial regulator said on Thursday it had slapped a record 33.32-million-pound fine on a unit of US banking giant JP Morgan for having failed to properly protect client money over a period of seven years.
The fine amounts to 40 million euros or 49 million dollars.
The Financial Services Authority (FSA) said that under current rules a company is required to keep client money separate from its own funds, thereby protecting client money in the event the company goes bankrupt.
The FSA said it had determined that between November 1, 2002 and July 8, 2009, JP Morgan Securities Limited failed to segregate client funds held by its futures and options business with JPMorgan Chase Bank.
It found that the money was kept in an "unsegregated" account with the bank.
During the seven-year period, the amount of client money held by the futures and options business of JP Morgan Securities Limited ranged from 1.9 billion dollars to 23 billion dollars.
"Had the firm become insolvent at any time during this period, this client money would have been at a risk of loss," the FSA contended.
FSA director of enforcement Margaret Cole said: "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 -- we have several more cases in the pipeline."
The agency described the infraction as an "error" that occurred after the merger of JP Morgan and Chase.
It said the action by JP Morgan Securities Limited had not been deliberate and was in fact revealed by the company itself.
The amount of the fine amounted to 1.0 percent of the average amount of unsegregated client money by JP Morgan Securities Limited with JPMorgan Chase Bank.
But the FSA said that because JP Morgan had cooperated in the investigation, the fine had been reduced by 30 percent.
© 2010 AFP