WASHINGTON, D.C. – J.P. Morgan Securities LLC (JPMS) has agreed to pay a $900,000 penalty to settle charges brought by the U.S. Commodity Futures Trading Commission (CFTC) for failing to adequately supervise the processing of exchange and clearing fees charged to customers. The settlement, finalized on January 11, 2017, stems from issues identified between 2010 and 2014.
According to the CFTC, JPMS, registered as a Futures Commission Merchant and swap dealer, did not implement sufficient systems to reconcile invoices from exchange clearinghouses with the fees actually billed to customers. The firm’s reconciliation process was described as largely manual, conducted by a single employee monthly using multiple systems. Additionally, JPMS lacked comprehensive written policies and procedures regarding clearing and exchange fee reconciliations.
This lack of oversight led to approximately $7.8 million in overcharges to some customers. The CFTC Order states that JPMS discovered the discrepancies in 2014, self-reported the issue, and subsequently refunded affected customers as a remedial measure.
The CFTC acknowledged JPMS’s cooperation throughout the investigation. This marks the third enforcement action by the CFTC regarding clearing firm supervisory failures in fee processing. Similar penalties were levied against Barclays Capital, Inc. in August 2016 ($800,000) and Merrill Lynch, Pierce, Fenner & Smith Incorporated in August 2014 ($1.2 million) for related violations.
The Order requires JPMS to cease and desist from violating the CFTC regulation governing diligent supervision. The case was led by CFTC Division of Enforcement staff members Susan Gradman, Joseph Patrick, Elizabeth Pendleton, Brigitte Weyls, Scott Williamson, and Rosemary Hollinger.
Source: CFTC.gov
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