New York, NY – J.P. Morgan Securities LLC (JPMS) has been penalized $900,000 by the U.S. Commodity Futures Trading Commission (CFTC) for failing to adequately supervise the processing of exchange and clearing fees charged to customers between 2010 and 2014. The CFTC issued an order detailing the settlement on January 11, 2017.
The investigation revealed that JPMS, registered as a Futures Commission Merchant and swap dealer, lacked sufficient systems to reconcile invoices from exchange clearinghouses with the fees actually billed to customers. The firm’s reconciliation process was largely manual, relying on a single employee at the end of each month and utilizing three separate internal systems.
According to the CFTC, JPMS also lacked adequate written policies and procedures governing the reconciliation of clearing and exchange fees. This resulted in the overcharging of customers by approximately $7.8 million. JPMS discovered the discrepancies in 2014, self-reported the issue to the CFTC, and subsequently refunded the affected customers.
The CFTC acknowledged JPMS’s cooperation throughout the investigation. As part of the settlement, JPMS is required to cease and desist from violating CFTC regulations regarding diligent supervision. This case marks the third action taken by the CFTC against clearing firms for supervisory failures in fee processing. Similar penalties were levied against Barclays Capital in August 2016 ($800,000) and Merrill Lynch in August 2014 ($1.2 million).
The CFTC’s Division of Enforcement, led by Susan Gradman, Joseph Patrick, Elizabeth Pendleton, Brigitte Weyls, Scott Williamson, and Rosemary Hollinger, conducted the investigation.
Source: CFTC.gov
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