The FSA fined J P Morgan Securities Ltd £33.32 million for failing to protect client money by segregating it appropriately.
Under the FSA’s client money rules, firms are required to keep client money separate from the firm’s money in segregated accounts with trust status. This helps to protect client money in the event of the firm’s insolvency.
Between 1 November 2002 and 8 July 2009, JPMSL failed to segregate the client money held by its futures and options business (F&O) with JPMorgan Chase Bank N.A (JPMCB). The error occurred following the merger of JPMorgan and Chase. Instead of being held overnight in a segregated money market account, JPMSL’s F&O client money was held in an unsegregated account with JPMCB. This error remained undetected for nearly seven years.
During this period, the client money balance held by the F&O business of JPMSL varied between $1.9 billion (in December 2002) and $23 billion (in October 2008). Had the firm become insolvent at any time during this period, this client money would have been at risk of loss.