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JPMorgan (JPM) to Pay $100M Penalty for Trade Reporting Lapses

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JPMorgan (JPM - Free Report) is expected to pay $100 million to the U.S. Commodity Futures Trading Commission (“CFTC”) to settle claims related to trade reporting lapses. The news was reported by Reuters, citing a source with direct knowledge of the matter.

Per the source, the Wall Street giant has also agreed to admit as part of the deal that it broke the agency’s rules.

While the admission has not been reported previously, it would benefit the CFTC, which has been trying to pester firms to assume more accountability for their wrongdoing.

A spokesperson for the CFTC declined to comment.

Also, a JPM spokesperson declined to comment but referred to previous statements that it self-reported the violation and found neither misconduct nor any harm to customers.

This March, JPM agreed to pay a fine of $348.2 million for failing to properly monitor the trading activities of its clients and employees. The fine was imposed by the Federal Reserve and the Office of the Comptroller of the Currency (“OCC”) who said that 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.”

The $348.2-million amount was one of the biggest fines that JPM paid 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 six months, JPM shares have gained 29.2% compared with the industry’s 31% growth.

 

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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 a 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 the 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.

In another case, Citigroup Inc. (C - Free Report) 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 the 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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