THE Financial Services Authority yesterday slapped JP Morgan with the biggest fine it has ever administered.
It issued a mammoth £33.3m fine for “failing to protect client money” after it found the bank failed to keep clients money in a special ring-fenced account.
The issue relates to billions of pounds of transactions processed by JP Morgan’s futures and options business between 2009-2009.
The FSA says client balances transferred directly into JP Morgan’s coffers fluctuated between £1.3bn and £16bn. This means it would be at risk in the event of the bank becoming insolvent.
No clients suffered any losses from the breach. But the FSA has been keen to prove its mettle after battling accusations of failing to spot and halt the excessively risky banker behaviour that helped trigger the worst credit crisis.
Because of its cooperation, the original fine of almost £50m was reduced by 30 per cent, in line with FSA practice. FSA head of enforcement Margaret Cole said: “JP Morgan committed a serious breach of our client money rules by failing to segregate billions of dollars of its clients’ money for nearly seven years.”
JP Morgan declined to comment.
Mathew Rutter, financial services partner at law firm Beachcroft said: “Firms should be taking this warning very seriously indeed as it clearly won’t be the last fine of this size.
He added: “It is significant that this is – by a long way – the biggest fine from the FSA so far. It is almost as much as the total amount of fines imposed by the FSA in the whole of 2009 - itself a record year.”
IN THE DOCK | PAST FSA FINES
£17,000,000 Royal Dutch/Shell Aug 2004
£13,900,000 Citigroup Jun 2005
£8,000,000 UBS May 2009
£7,000,000 Toronto Dominion Dec 2009
£7,000,000 Alliance & Leicester Jul 2008
£6,363,643 Deutsche Bank Nov 2006
£5,600,000 Credit Suisse Aug 2008
£5,250,000 Aon Aug 2009
£4,000,000 CSFB Dec 2002
£2,800,000 GMAC Oct 2009