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JPMorgan (JPM) to Pay $348M Fine for Trade Monitoring Failure
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JPMorgan (JPM - Free Report) will have to pay a fine of $348.2 million for failing to properly monitor the trading activities of its clients and employees. The fine has been imposed by the Federal Reserve and the Office of the Comptroller of the Currency (“OCC”).
Per the regulators, the misconduct occurred between 2014 and 2023.
The regulators said that JPM “engaged in unsafe or unsound practices” and “failed to establish adequate governance over trading venues on which it is active.”
The OCC stated that JPMorgan “failed to surveil billions of instances of trading activity on at least 30 global trading venues.”
A spokesperson for JPMorgan has said that the bank self-identified the issue and is working to address the matter. JPM does not expect any disruption of existing client services.
The bank spokesperson further mentioned that there was no evidence of employee misconduct or harm to clients or the broader market.
Notably, last month, JPMorgan already disclosed that it was expecting to pay $350 million in civil penalties to two U.S. regulators to settle claims that it reported incomplete trading data to surveillance platforms.
At that time, the bank also said that while the $350-million payment would resolve the matter with the two regulators, it was in advanced negotiations with a third regulator, which might not result in a resolution.
The $348.2-million amount is one of the biggest fines that JPM will pay for its data management and monitoring lapses in the last few years.
In 2021, JPMorgan agreed to pay $200 million to settle civil charges from two other regulators over record-keeping lapses.
Over the past three months, JPM shares have gained 13.1% compared with the industry’s 10.3% growth.
Fines Related to Record-Keeping Lapses Faced by Other Banks
In August 2023, Goldman Sachs (GS - Free Report) was charged with a civil penalty of $5.5 million, per the Commodity Futures Trading Commission’s (“CFTC”) order. The order required GS to cease and desist from committing future violations of the Commodity Exchange Act and CFTC’s record-keeping provisions.
Per the CFTC’s findings, GS violated the provisions of a previous order, and failed to appropriately record and retain certain audio files.
In November 2019, Goldman was levied with a civil penalty of $1 million for failure to record the phone lines of its trading and sales desk in January and February 2014 for 20 calendar days. The CFTC’s order required the company to cease and desist from further violations of record-keeping regulations.
Post the 2019 order, Goldman continued to have record-keeping failures, which were in violation of the cease-and-desist provisions. It failed to record and retain audio calls due to failure in both its hardware and software systems.
Citigroup Inc. (C - Free Report) has consented to the Securities and Exchange Commission’s (“SEC”) cease-and-desist order, levying a civil penalty of $2.9 million on the bank. The bank’s broker-dealer unit was charged for intentionally violating record-keeping requirements with respect to expenses incurred in its underwriting business.
C neither denied nor admitted the alleged claims of the SEC’s findings.
Per SEC’s findings, Citigroup’s broker-dealer implemented an unverified method for the calculation of its indirect expenses from at least 2009 through May 2019 in its underwriting business.
It was found that in each deal, wherein Citigroup was engaged as a lead underwriter, it applied a fixed percentage to the underwriting fee to calculate the indirect expense amount. It then used fixed “allocation grids” to divide the indirect expense amount into certain specific expense categories.
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JPMorgan (JPM) to Pay $348M Fine for Trade Monitoring Failure
JPMorgan (JPM - Free Report) will have to pay a fine of $348.2 million for failing to properly monitor the trading activities of its clients and employees. The fine has been imposed by the Federal Reserve and the Office of the Comptroller of the Currency (“OCC”).
Per the regulators, the misconduct occurred between 2014 and 2023.
The regulators said that JPM “engaged in unsafe or unsound practices” and “failed to establish adequate governance over trading venues on which it is active.”
The OCC stated that JPMorgan “failed to surveil billions of instances of trading activity on at least 30 global trading venues.”
A spokesperson for JPMorgan has said that the bank self-identified the issue and is working to address the matter. JPM does not expect any disruption of existing client services.
The bank spokesperson further mentioned that there was no evidence of employee misconduct or harm to clients or the broader market.
Notably, last month, JPMorgan already disclosed that it was expecting to pay $350 million in civil penalties to two U.S. regulators to settle claims that it reported incomplete trading data to surveillance platforms.
At that time, the bank also said that while the $350-million payment would resolve the matter with the two regulators, it was in advanced negotiations with a third regulator, which might not result in a resolution.
The $348.2-million amount is one of the biggest fines that JPM will pay for its data management and monitoring lapses in the last few years.
In 2021, JPMorgan agreed to pay $200 million to settle civil charges from two other regulators over record-keeping lapses.
Over the past three months, JPM shares have gained 13.1% compared with the industry’s 10.3% growth.
Image Source: Zacks Investment Research
Currently, JPM carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Fines Related to Record-Keeping Lapses Faced by Other Banks
In August 2023, Goldman Sachs (GS - Free Report) was charged with a civil penalty of $5.5 million, per the Commodity Futures Trading Commission’s (“CFTC”) order. The order required GS to cease and desist from committing future violations of the Commodity Exchange Act and CFTC’s record-keeping provisions.
Per the CFTC’s findings, GS violated the provisions of a previous order, and failed to appropriately record and retain certain audio files.
In November 2019, Goldman was levied with a civil penalty of $1 million for failure to record the phone lines of its trading and sales desk in January and February 2014 for 20 calendar days. The CFTC’s order required the company to cease and desist from further violations of record-keeping regulations.
Post the 2019 order, Goldman continued to have record-keeping failures, which were in violation of the cease-and-desist provisions. It failed to record and retain audio calls due to failure in both its hardware and software systems.
Citigroup Inc. (C - Free Report) has consented to the Securities and Exchange Commission’s (“SEC”) cease-and-desist order, levying a civil penalty of $2.9 million on the bank. The bank’s broker-dealer unit was charged for intentionally violating record-keeping requirements with respect to expenses incurred in its underwriting business.
C neither denied nor admitted the alleged claims of the SEC’s findings.
Per SEC’s findings, Citigroup’s broker-dealer implemented an unverified method for the calculation of its indirect expenses from at least 2009 through May 2019 in its underwriting business.
It was found that in each deal, wherein Citigroup was engaged as a lead underwriter, it applied a fixed percentage to the underwriting fee to calculate the indirect expense amount. It then used fixed “allocation grids” to divide the indirect expense amount into certain specific expense categories.