J.P. Morgan Securities has been fined $2.8m by the Financial Industry Regulatory Authority (FINRA) for flouting the Securities and Exchange Commission’s (SEC) Customer Protection Rule and related supervisory failures.
The failures, which took place between March 2008 and June 2016, was due to lack of proper processes to ensure the effective operation of its control systems, FINRA said.
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The watchdog accused the company of failing to segregate customer securities in good control locations separate from its own assets, due to systemic coding and design flaws as well as ineffective supervision. The failure led to hundreds of millions of dollars of deficits, the regulator alleged.
FINRA department of enforcement executive vice president Susan Schroeder said: “The Customer Protection Rule is an important component of investor protection, and member firms must have reasonably designed and maintained systems and procedures to comply with the possession and control requirements.”
The company agreed to the fine, without admitting or denying the allegations.
In deciding the penalty, the regulator took into consideration the company’s cooperation in addressing the breaches and its work to over-reserve cash deposits for protecting customers from failed segregation of securities.
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By GlobalData
