The group was hit with a $220m (£137.6m) fine by the Financial Conduct Authority, a $200m (£124.5m) action by the US Securities and Exchange Commission, a $300m (£186.7m) penalty by the Office of the Comptroller of the Currency and the Federal Reserve, which also imposed a penalty of $200m.
Its chief investment office (CIO) demonstrated flaws from portfolio level up to senior management, according to the FCA, resulting in a series of breaches of the FCA’s Principles for Business – the fundamental obligations firms have under the regulatory system.
The breaches pertained to the $6.2bn trading losses seen last year, which arose as a result of the so-called ‘London Whale’ trades – caused by a high risk trading strategy, weak management of that trading and inadequate response to information that should have flagged the level of risks present in the CIO’s Synthetic Credit Portfolio.
JPMorgan agreed an early stage settlement with the FCA, which saw the group qualify for a 30% discount. Without this discount the fine would have been just over $316m (£196.5m).
Tracey McDermott, director of enforcement and financial crime at the FCA, said: “When the scale of the problems at JPMorgan became apparent, it sent a shockwave through the markets. Maintaining the integrity of markets is a key part of our wholesale conduct agenda. We consider JPMorgan’s failings to be extremely serious such as to undermine the trust and confidence in UK financial markets.
“This is yet another example of a firm failing to get a proper grip on the risks its business poses to the market. There were basic failings in the operation of fundamental controls over a high risk part of the business. Senior management failed to respond properly to warning signals that there were problems in the CIO. As things began to go wrong, the firm didn’t wake up quickly enough to the size and the scale of the problems. What is worse, they compounded this by failing to be open and co-operative with us as their regulator.
“Firms must learn the lessons from this incident and ensure that they have business practices, values and culture to control the risks in their businesses.”
