JPMorgan pays and provisions USD 448.2 million for trade surveillance data reporting failures

On 16 February 2024, it was reported that JPMorgan expected to be fined USD 350 million by two unnamed US regulators for reporting incomplete trading data to its market surveillance systems. On 14 March 2024, the Federal Reserve Board (Fed) and the Office of the Comptroller of the Currency (OCC) announced that JPMorgan had been fined a total of USD 348.2 million. The bank announced on 1 May 2024 that it had provisioned a further USD 100 million for another related regulatory settlement, increasing the total loss for this event to USD 448.2 million (EUR 416.2 million).

In its Form 10-K annual report filed with the US Securities and Exchange Commission (SEC) on 16 February 2024, JPMorgan said that certain trading and order data from its corporate and investment bank (CIB) had not been reported to its trade surveillance platforms. The missing data largely corresponded to its sponsored market access clients. The bank self-identified the issue following inquiries from the US government into its trading processes. JPMorgan added that it had not identified any harm to the market or customers or any employee misconduct.

JPMorgan said that since identifying the issue, it had enhanced the CIB’s inventory of trading venues and its data completeness controls, and that other remediation was underway as of 16 February 2024. As well as expecting to pay USD 350 million in aggregate penalties, the bank expected to be ordered to complete its remediation and engage an independent consultant. JPMorgan also noted that it was in advanced discussions with a third unnamed US regulator, but did not anticipate a resolution as of 16 February 2024.

According to the Fed and the OCC, JPMorgan failed to properly monitor firm and client trading activities for market misconduct. The bank did not appropriately monitor billions of instances of trading and order activity through its CIB on at least 30 global trading venues. The regulators highlighted the gaps in venue coverage stemming from JPMorgan’s ineffective trade surveillance programme, which operated without adequate data oversight, controls, or reconciliation processes. The OCC said that the misconduct had occurred since 2019, while the Fed said that it occurred between 2014 and 2023.

On 14 March 2024, it was announced that JPMorgan had been fined a total of USD 348,167,980 by the two regulators, comprising a penalty of USD 98.2 million imposed by the Fed on 8 March 2024, and a penalty of USD 250 million imposed by the OCC on 13 March 2024. The regulators ordered JPMorgan to undertake certain remedial activities, such as:

• complete a lookback review to find previously unidentified market misconduct;
• engage a third party to assess its trade surveillance programme;
• obtain regulatory permission before onboarding new trading venues;
• enhance its trading venue and data governance programme;
• improve its internal audit programme; and
• create an independent compliance committee to oversee all remediation.

On 1 May 2024, in its quarterly report, JPMorgan said it had provisioned a further USD 100 million in anticipation of a settlement with a third unnamed US regulator. The bank expected to pay a total of USD 100 million to the regulator after offsets for amounts paid to the OCC and the Fed. JPMorgan also said that it had completed enhancements to its venue inventory and data completeness controls, nearly completed its lookback review, and that other remediation remained underway.

UPDATES

14 March 2024: Fed and OCC announce fines. Loss Amount decreased from USD 350,000,000 to USD 348,167,980. Date of Occurrence From changed from Not Identifiable to 1 January 2014. Date of Occurrence To changed from Not Identifiable to 31 December 2023. Date of Recognition/Settlement changed from Not Identifiable to 8 March 2024. Alleged Cause CS0403 Inadequate Policy / Procedure added. Headline and paragraph 1 amended. Paragraphs 4 and 5 added.

1 May 2024: JPMorgan provisions additional USD 100 million. Loss Amount increased from USD 348,167,980 to USD 448,167,980. Headline and paragraph 1 amended. Paragraph 6 added.