JPMorgan to Pay $2.8 Million for Failing to Segregate Customer Funds
By Andrew Ackerman
JPMorgan Chase & Co. agreed to pay $2.8 million to settle charges brought by Wall Street's self-regulator that the bank failed for years to adequately separate customer cash from the firm's own assets.
The Financial Industry Regulatory Authority, in announcing the settlement Wednesday, said J.P. Morgan's systems had "design flaws and coding and data errors" that failed to properly segregate customer funds and securities from March 2008 to June 2016.
"Shares that should have been segregated were available for the firm's use, due to systemic coding and design flaws, recurring and unresolved deficits and unreasonable supervision," Finra said.
JPMorgan violated a Securities and Exchange Commission rule designed to ensure that investors recover their assets if their broker becomes insolvent, Finra said. The conduct in question revolves largely around a legacy clearing system JPMorgan acquired from Bear Stearns & Co. during the financial crisis, according to Finra.
The self-regulator also said the bank didn't have "reasonable procedures" to test its segregation processes. Still, it flagged JPMorgan's "extraordinary cooperation" and said the bank took prompt action to fix the problems.
In settling the matter, JPMorgan neither admitted nor denied the charges, but consented to Finra's findings.
"We're pleased Finra recognized our extraordinary cooperation to resolve the matter," the firm said in a statement. "After a thorough review, we enhanced our controls, upgraded our systems and there were no findings that any client accounts were harmed."
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(END) Dow Jones Newswires
December 27, 2017 11:25 ET (16:25 GMT)Copyright (c) 2017 Dow Jones & Company, Inc.