Fed and OCC fine JPMorgan Chase $348.2 million for trade surveillance issues

Rick Steves

As part of the enforcement action, JP Morgan Chase is now restricted from onboarding new trading venues without receiving prior written non-objection from the Reserve Bank.

JPMorgan Chase

The Federal Reserve Board and the Office of the Comptroller of the Currency have issued fines against JPMorgan Chase totaling approximately $348.2 million.

JPMorgan Chase was found to have significant deficiencies in its trade surveillance program between 2014 and 2023, including inadequate monitoring practices thus potentially enabling market misconduct.

Fed fines JPMorgan Chase $98.2 million

The Federal Reserve Board has fined JPMorgan Chase & Co. approximately $98.2 million after issuing an enforcement action against the firm for an inadequate program to monitor firm and client trading activities for market misconduct.

JPMorgan Chase is now required to review and take corrective action to address the firm’s inadequate monitoring practices, which occurred between 2014 and 2023, according to the Fed, which took action in coordination with the Office of the Comptroller of the Currency.

The Fed accused JPMorgan Chase of failing at various points in time to adequately surveil certain trading and order activity throughout the firm’s Corporate and Investment Bank (“CIB”) on at least 30 global trading venues, which include systems or electronic platforms operated by investment firms or market operators that bring together third party buying and selling interests in financial instruments to conduct transactions.

JPMorgan Chase is restricted from onboarding new trading venues

As part of the enforcement action, JPMorgan Chase is now restricted from onboarding new trading venues without receiving prior written non-objection from the Reserve Bank.

The Fed further added that all requests for prior non-objection from the Reserve Bank shall be submitted at least thirty (30) days prior to the proposed onboarding of a new trading venue.

All such requests shall contain a description of: (i) the trading activities the Firm intends to conduct or facilitate on the proposed new trading venue; (ii) the market misconduct risks related to those trading activities; and (iii) the controls within the bank’s trade surveillance program that would surveil trading activities for market misconduct on the proposed trading venue.

OCC fined JPMorgan Chase $250 million

The Office of the Comptroller of the Currency (OCC) announced a $250 million civil money penalty against JPMorgan Chase related to the same deficiencies. The OCC found that the bank operated with gaps in trading venue coverage and without adequate data controls required to maintain an effective trade surveillance program.

Generally, trading venues are systems or electronic platforms, operated by investment firms or market operators, that bring together multiple third-party buying or selling interests in financial instruments to perform a transaction.

The OCC expects banks to perform trade surveillance to monitor the market conduct of its traders and clients as part of its market conduct risk control framework. The OCC found that JPMC failed to surveil billions of instances of trading activity on at least 30 global trading venues. These gaps and deficiencies in JPMC’s trade surveillance program constitute unsafe or unsound banking practices.

The OCC requires the bank to correct the deficiencies, to seek the OCC’s non-objection before onboarding new trading venues, and to obtain an independent third party to conduct a trade surveillance program assessment.

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