The Federal Reserve and Office of the Comptroller of the Currency fined JPMorgan Chase nearly $350 million for shortcomings in its surveillance of its trading activities, an action that the bank has hinted was coming for months.
Bloomberg
JPMorgan Chase will pay $348 million in monetary penalties leveled by federal bank regulators over lackluster surveillance of its global trading venues.
The Federal Reserve and Office of the Comptroller of the Currency announced the fines and corresponding restrictions placed on the $3.9 trillion-asset bank in enforcement actions released Thursday.
Along with the penalties, JPMorgan also agreed to restrictions on adding new trading venues — an expansive term of art that includes many different kinds of trading platforms — and committed to commissioning both internal and independent third-party reviews of its trade surveillance program.
The Fed and OCC examined the trading activity of JPMorgan's Corporate & Investment Bank, or CIB — which provides market-making, prime brokerage and treasury and securities products and services to corporations, financial institutions and governments — between 2014 and 2023, according to the Fed.
The probe found that JPMorgan failed to monitor trades and orders placed on at least 30 global trading platforms. Specifically, the agencies flagged the bank's reconciliation processes, which are supposed to verify transactions against supporting documentation to check for authenticity.
As part of its consent agreement with the regulators, JPMorgan has promised to improve its automated reconciliation systems and establish a remediation plan for when discrepancies are identified.
The OCC, which supervises nationally chartered banks, is set to receive $250 million of the total monetary penalty, while the Fed, which oversees the nation's largest, global systemically important banks, will collect $98.2 million.
The consent order does not represent an admission of guilt by JPMorgan Chase but does preclude any legal appeal by the bank for the issues identified in the order.
JPMorgan has been signaling that a large penalty would be imminent for months. In November, the bank told investors that a probe of its trading operations by a then-unnamed regulator could result in a fine. In its annual report to the Securities and Exchange Commission, known as a 10-K filing, in February the company disclosed that the investigation involved two regulators and would cost roughly $350 million in fines. JPMorgan was not immediately available for comment.
In that filing, the bank said it "self-identified" that certain trading data was not feeding into its surveillance system, but noted that a review of the data that was not surveilled showed no employee misconduct or harm to customers or the broader market.
Yet, the volume of activity that went unchecked was not trivial. Billions of dollars of trading activity involving JPMorgan was improperly monitored dating back to at least 2019, according to the OCC's action.
"While the identified gaps represent a fraction of the overall activity across the CIB, the data gap on one venue, which largely consisted of sponsored client access activity, was significant," the bank stated in its February filing. "The firm is dedicated to maintaining rigorous controls and continuously enhancing the reliability of its trade infrastructure."
In the filing, the bank noted that it was also engaged in "advanced negotiations" with a third regulatory agency, but noted that "there is no assurance that such discussions will result in a resolution."
The penalties leveled against JPMorgan were the first banking-related fines against the company since 2020, when the OCC dinged it for $250 million over issues relating to the bank's ability to manage conflicts of interest in its fiduciary services business. That same year, JPMorgan was also hit with a $920 million fine from the Justice Department and Commodity Futures Trading Commission for illegal trades of Treasuries and precious metals futures.
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