LONDON — The U.K. Financial Services Authority said Thursday that it has fined JPMorgan Chase Co. £33.32 million (about $48.85 million) for failing to separate client money from the firm's, the largest fine in the FSA's history.
The regulator also warned firms that it has more such cases in the pipeline, urging them to ensure their internal controls over client money separation are in place.
The FSA said JPMorgan Securities Ltd. didn't follow the rules by keeping client money held by its futures and options business separated from the firm's own money between November 2002 and July 2009.
It said that during that period, the client money balance held by the business varied between $1.9 billion and $23 billion. The error, which was discovered in July last year, occurred following the merger between JPMorgan and Chase and wasn't deliberate, it added. Clients didn't lose any money and the mistake didn't result in any incorrect financial reporting, the FSA said.
"Had the firm become insolvent at any time during this period, this client money would have been at risk of loss," the FSA said in a statement.
The company "committed a serious breach of our client money rules by failing to segregate billions of dollars of its clients' money for nearly seven years. The penalty reflects the amount of client money involved in this breach," it added.
A JPMorgan spokesman in London declined to comment.
The latest FSA enforcement comes as the agency continues to face pressure to prove that its existence is essential for U.K.'s financial health. The agency, which has a toothless reputation, was nearly abolished following national elections last month. A government coalition, however, decided to keep it.
In the statement, the FSA said it has created a new unit covering client money and assets, and warned that it has "several more cases in the pipeline."
"Firms need to raise their game as the FSA's focus on this area will continue to intensify," said Sally Dewar, FSA managing director of risk.
JPMorgan received a 30% discount on the fine for agreeing to settle the issue at an early stage, the regulator said. Without the settlement discount, the fine would have been £47.6 million, the FSA said.
The previous largest fine by the FSA was £17 million against to Royal Dutch Shell PLC in 2004 for market abuse.
