JPMorgan Chase has agreed to a settlement of nearly $350 million with bank regulators due to surveillance failures spanning the past decade, concerning billions of trades handled by the bank. The company disclosed that it identified these record-keeping deficiencies internally and promptly reported them to both the Federal Reserve Board and the Office of the Comptroller of the Currency (OCC). The settlement entails a payment of $98 million to the Federal Reserve and $250 million to the OCC.
Following the announcement of the penalties on Thursday morning, JPMorgan’s shares experienced a 1.5% decline, trading at $188.51, while the broader S&P 500 index saw a marginal decrease of just 0.05%.
Under regulatory obligations, banks and brokerage firms are responsible for monitoring trades to detect any potential misconduct by clients or employees. In its recent 10-K filing on February 16, JPMorgan hinted at the ongoing trading investigation, acknowledging that certain information regarding orders and trades conducted on electronic trading platforms had not been adequately relayed to the bank’s trade surveillance systems. The 10-K also highlighted a significant data gap at one of these trading venues.
A spokesperson for JPMorgan emphasized that the bank proactively identified the issue and has since taken significant remedial measures, with additional actions underway. The bank clarified that its review did not uncover any evidence of employee misconduct or harm to clients or market integrity due to the previously undisclosed data. JPMorgan assured that there would be no service disruptions for clients as a result of the settlements.
In response to the surveillance failures, the OCC issued a cease-and-desist order requiring JPMorgan to rectify its surveillance systems, conduct a retrospective review of the data for potential misconduct, and appoint an external monitor. Additionally, any future connections to new trading venues will necessitate approval from the regulator.
JPMorgan also disclosed that a third regulator is currently conducting its investigation into the data irregularities.