JPMorgan Chase was fined £33.32 million, or $49 million, by Britain’s financial regulator Thursday for failing to keep client funds separate from the firm’s money.
The Financial Services Authority said JPMorgan did not “adequately protect” client money held by its futures and options business. The error, which occurred after the merger of JPMorgan and Chase and remained undetected for nearly seven years, put the client funds at risk had the firm become insolvent, the regulator said.
“JPMorgan Securities committed a serious breach of our client rules by failing to segregate billions of dollars of its clients’ money for nearly seven years,” the F.S.A. director of enforcement and financial crime, Margaret Cole, said in a statement. “The penalty reflects the amount of client money involved in this breach.” JPMorgan representatives were not immediately available for comment.
JPMorgan failed to separate client funds worth between $1.9 billion and $23 billion from 2002 to 2009, according to the F.S.A. The regulator said the fine is meant to “send out a strong message to firms of all sizes that they must ensure client money is segregated” and added that it had “several more cases in the pipeline.”
The F.S.A. has stepped up its enforcement activities over the last year, handing out more and bigger fines to financial institutions and individuals. After being criticized for missing early warning signs that British lenders were taking too much risk ahead of the subprime crisis, the F.S.A. is now looking to improve its track record in protecting clients of financial services firms and the stability of the banking system.
JPMorgan qualified for a 30 percent discount on the fine because it “worked constructively” with the F.S.A. during the investigation and agreed to settle at an early stage, the regulator said. The firm reported the issue itself once it discovered the error and no clients suffered any losses, the F.S.A. said.