Washington, D.C. – J.P. Morgan Securities LLC (JPMS) has been penalized $650,000 by the U.S. Commodity Futures Trading Commission (CFTC) for submitting inaccurate large trader reports, the agency announced on July 29, 2014. The violations stemmed from failures to accurately report positions held by certain large traders carried by JPMS, despite repeated notifications from the CFTC regarding errors.
The CFTC’s order details that since at least 2012, the agency had been alerting JPMS to issues with its large trader reports, with the frequency of errors increasing over time. These reports, crucial for the CFTC to assess market risks and ensure regulatory compliance, require daily submissions of data including open futures and options positions, delivery notices, and Exchange For Related Positions (EFRPs).
In December 2012, the CFTC informed JPMS that the ongoing errors were unacceptable. JPMS, which relied on a third-party vendor for report generation, assured the CFTC that the problems would be resolved by the end of January 2013. However, inaccurate reports continued to be submitted for over a year, from February 1, 2013, to February 2014, containing hundreds of errors.
The CFTC found that JPMS violated Section 4g(a) of the Commodity Exchange Act and CFTC Regulation 17.00(a)(1) concerning the reporting of delivery notices and EFRPs related to futures positions. “The large trader reports are vital to the CFTC’s role in monitoring market behavior and are important to members of the public,” stated CFTC Director of Enforcement Aitan Goelman. “Submission of accurate and reliable data to the CFTC is essential.”
Beyond the financial penalty, JPMS is required to submit a certified statement of compliance within 120 days, confirming that it has enhanced its systems and procedures for reporting delivery notices and EFRPs, and that these improvements have been thoroughly tested to ensure adherence to CFTC regulations.
The case was led by CFTC staff members Allison Baker Shealy, George H. Malas, and Paul G. Hayeck, with support from data and technology staff including Jorge Herrada, Margaret Sweet, Howard Rosen, Marshall Horn, and Yolonda Herron.
Source: CFTC.gov
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