FINRA has slammed J.P. Morgan Securities and J.P. Morgan Clearing Corp. with more than $1 million in fines for alleged operational systems, supervisory and recordkeeping deficiencies.
The regulator berated J.P.Morgan Securities for systems failures that affected the global wealth management clients of J.P. Morgan Private Bank and Heritage Private Client Services. Specifically, the regulator claimed the firm failed to send investment objective change letters to 3,266 clients from December 2006 to December 2012.
The firm also allegedly failed to collect and review certain employees' outside brokerage account statements, as required by industry rules. The firm discovered that it had not reviewed as many as 12,456 outside brokerage account statements associated with 1,929 employee accounts from October 2012 to August 2013. During its review, it discovered seven instances where employees violated the firm's policy requiring pre-clearance of their transactions involving exchange-traded funds.
"Although J.P. Morgan Securities had supervisory systems and procedures in place to track and review employees' outside brokerage accounts, those systems were not reasonably designed to track and record outside brokerage statements for review," FINRA wrote in its filing.
FINRA also scolded the firm for neglecting to send letters providing a copy of the account record to 1,310 new private bank account holders within 30 days of account opening. The failure to send the 30-day letters occurred from January 2009 to September 2013.
J.P. Morgan Securities also allegedly failed to provide transaction confirmations to 7,298 private bank customers and to accurately preserve written correspondence with certain private client services customers.
Lastly, FINRA took J.P. Morgan Clearing Corp. to task for not sending privacy notices to thousands of account holders in 2011, 2012 and 2013.
J.P. Morgan Securities was fined $775,000 for its failures, while J.P. Morgan Clearing was fined $250,000. Both firms were censured.
In their settlement with FINRA, neither J.P. Morgan Securities nor J.P. Morgan Clearing admitted or denied the charges but consented to an entry of FINRA's findings.
Darin Oduyoye, a spokesperson for J.P. Morgan Chase, had no comment beyond noting that neither client assets nor transaction executions were affected by the alleged systems and operational deficiencies.
J.P. Morgan's counsel, Paul Tyrrell of law firm Sidley Austin, did not respond to an email seeking comment.
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