J.P. Morgan broker-dealer and custodian fined $1 million

The bank's broker-dealer and custody and clearing arm allegedly violated SEC and Finra rules through operational, supervisory and record-keeping misconduct

Apr 25, 2016 @ 12:06 pm

By Greg Iacurci

Broker-dealer and custody affiliates of JPMorgan Chase Bank, N.A. have been fined more than $1 million by an industry regulator for a number of operational, supervisory and record-keeping deficiencies at the firms.

The Financial Industry Regulatory Authority Inc. fined J.P. Morgan Securities and J.P. Morgan Clearing Corp. a respective $775,000 and $250,000, according to a disciplinary action document filed April 22 by the industry-funded broker-dealer regulator.

J.P. Morgan Securities is a full-service broker-dealer headquartered in New York, with around 20,000 registered representatives and 5,700 branch offices. J.P. Morgan Clearing Corp. is the bank's clearing, custody, settlement and lending arm.

In total, Finra alleged six breaches by the firms, whose misconduct ran afoul of several Finra and Securities and Exchange Commission rules, according to the filing. Alleged violations by JPMS mainly impacted clients of two JPMS Global Wealth Management businesses, called J.P. Morgan Private Bank and JPMS Heritage Private Client Services.

JPMS allegedly failed to send clients letters confirming changes in their investment objectives within 30 days of the change over a six-year period between December 2006-2012. Among other things, the firm also failed to send clients notification letters within 30 days of account opening, between January 2009 and September 2013, and didn't provide transaction confirmations to several thousand clients from September 2007-2014, according to the document.

Further, JPMS allegedly failed to collect and review around 2,000 representatives' outside brokerage account statements over an 11-month period between 2012 and 2013.

J.P. Morgan Clearing Corp., which provides clearing and custody for a number of broker-dealers, also didn't send annual privacy notices over 2011-2013 to hundreds of thousands of account holders at those broker-dealers.

JPMorgan spokesman Darin Oduyoye didn't comment beyond saying the fine concerned an operational and systems issue, and client assets and transaction executions weren't affected.


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