JP Morgan Chase participates in trillions of dollars of financial market trading across the world every day, but federal authorities claimed the bank’s systems for sharing information of such activity with them have been broken for almost a decade. These failures have resulted in fines totaling more than $348 million, with more expected.
On Thursday, JPMorgan‘s chief federal regulator, the Office of the Comptroller of the Currency, penalised the bank $250 million for the errors. The move came after the Federal Reserve imposed a penalty of $98.2 million on March 8. In a recent public filing, the bank informed investors that a third regulator is contemplating a separate action that would most likely include a monetary penalty.
The breaches at the bank, which happened between 2014 and 2023, impacted authorities looking for data on financial market activities to assist detect instances of misbehaviour such as insider trading and market manipulation. According to the authorities, JP Morgan did not keep and share information about trades made by clients and businesses across around 30 distinct trading platforms and venues.
Brian Marchiony on the breach
Brian Marchiony, a JP Morgan spokesperson, stated that the bank discovered the vulnerabilities on its own and informed regulators. JP Morgan did not foresee any disruption to client services as it worked to resolve the issues, he added.
“Significant remedial actions have been taken, and more are in the works,” Mr. Marchiony added. “We have not found any employee misconduct or harm to clients or the market in our review of the previously uncaptured data.”
The authorities’ paperwork outlining the fines provided scant details about the kind of information that JP Morgan was failing to gather and submit, stating only that the bank had failed to account for “billions of instances of trading activity.” This might include messages concerning trading orders issued by JP Morgan staff to customers.
Regulators, including the Securities and Exchange Commission and the Commodity Futures Trading Commission, have recently cracked down on how big banks’ traders communicate with their clients, penalising banks for allowing traders to use WhatsApp and other encrypted messaging services that are more difficult to track than emails or recorded voice calls.
Settlement announced
The settlement, announced on Thursday, is the bank’s second significant sanction in recent years for data management and monitoring. In 2021, JPMorgan agreed to pay $200 million to resolve civil penalties from two different authorities over record-keeping errors, the first in a series of lawsuits involving similar lapses on Wall Street.
The latest OCC order requires the bank to reform and strengthen its trade surveillance programme, as well as perform a third-party assessment of its rules. The new rule requires it to obtain regulatory approval for any new trading venues.
