FSA in probe of JPMorgan

INVESTMENT bank JPMorgan Chase has instructed KPMG to conduct a review into its procedures for looking after client money, after a systems error sparked an inquiry into its methods by the City watchdog.<br /><br />JPMorgan confirmed yesterday it had recently discovered an operational error dating back to 2002, which involved failing to keep around &pound;8.5bn of client money completely segregated from the bank&rsquo;s own funds.<br /><br />The bank said it had immediately alerted the Financial Services Authority to the situation and engaged accountancy firm KPMG to assist in a review, after the problem was discovered a couple of weeks ago.<br /><br />&ldquo;We identified an operational error that was corrected within 24 hours of its discovery. No clients have lost money as a result of this error and we are cooperating fully with the FSA,&rdquo; a spokeswoman for the bank said.<br /><br />The error occurred in JPMorgan&rsquo;s futures and options arm, but is understood to have been due to a faulty technical process rather than a slip-up by a team or individual at the bank.<br /><br />Under FSA rules, client funds are supposed to be protected by maintaining a strict separation from money belonging to the bank.<br /><br />A spokeswoman for the FSA declined to comment on the individual case, but said any fines imposed by the regulator depend on a number of factors, including the difficulty of detecting the breach, the financial resources of the firm in question, the length of the breach and the extent to which it is determined to be reckless or deliberate.<br /><br />She did not rule out the possibility of individuals being fined in similar probes into large banks.