Commodity Futures Trading Commission (CFTC) has issued an order filing and simultaneously settling charges against JP Morgan Securities and a CFTC-registered Futures Commission Merchant, for submitting inaccurate reports to the CFTC relating to the required reporting of positions held by certain large traders whose accounts are carried by JPMS.
The reporting violations occurred despite the CFTC notifying JPMS of numerous errors in its reports. The CFTC Order requires JPMS to pay a $650,000 civil monetary penalty to address its unlawful conduct.
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The reports are known as the "large trader" reports and are used by the CFTC in order to evaluate potential market risks and monitor compliance with CFTC requirements.
CFTC Director of Enforcement Aitan Goelman commented: "The large trader reports are vital to the CFTC’s role in monitoring market behavior and are important to members of the public, many of whom rely on that information in forming trading strategies. Therefore, submission of accurate and reliable data to the CFTC is essential. The CFTC will be vigilant in enforcing these rules in order to ensure the integrity of the regulatory structure and to maintain transparency in the markets."
The CFTC Order specifically finds that since at least 2012, the CFTC was notifying JPMS about errors in its large trader reports, which increased in frequency throughout the year.
CFTC Regulations require FCMs to submit information on a daily basis for certain large traders, such as the number of open futures or options positions; the number of delivery notices issued or stopped; and the number of Exchange For Related Positions (EFRPs). In December 2012, the CFTC notified JPMS that the on-going problems were unacceptable. JPMS, relying on its third-party vendor that generated the reports for JPMS, assured CFTC staff that the problems would be resolved on or before the end of January 2013.
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By GlobalDataHowever, JPMS continued to submit large trader reports that contained hundreds of errors throughout the period from February 1, 2013 to February 2014.
In addition to imposition of the $650,000 civil monetary penalty, the CFTC ordered JPMS to submit a certified statement of compliance within 120 days of the entry of the CFTC Order stating that it has completed enhancements to its systems and procedures related to reporting of delivery notices and EFRPs, and has tested such systems and procedures to ensure that they now comply with the requirements of the CEA and CFTC Regulations.
The CFTC Division of Enforcement staff members responsible for this matter are Allison Baker Shealy, George H. Malas, and Paul G. Hayeck, with assistance from CFTC Office of Data and Technology staff Jorge Herrada, Margaret Sweet, Howard Rosen, Marshall Horn, and Yolonda Herron.
