Reuters | U.S. investment bank JPMorgan Securities Ltd has been
fined a record $49.12 million in Britain for failing to protect
billions of dollars of client money over almost seven years.

Issuing a stark warning to other banks operating in Britain, the
country’s Financial Services Authority said on Thursday that JPMorgan
had failed to adequately protect client money of between $1.9 billion
and $23 billion between November 2002 and July 2009.

“This penalty sends out a strong message to firms of all sizes that they must ensure client money is segregated in accordance with FSA rules. Firms need to sit up and take notice of this action — we have several more cases in the pipeline,” warned Margaret Cole, the FSA’s head of enforcement.

Under FSA client money rules, companies have to ringfence client money from the firm’s money and keep it in segregated accounts with trust status to protect it in the event of an insolvency.

However, JP Morgan Securities failed to segregate client money held by its futures and options business (F&O) with JPMorgan Chase Bank N.A. (JPMCB) following the merger of JP Morgan & Co and Chase Manhattan Corporation in 2000.

The error remained undetected for nearly seven years.

No clients suffered any losses from the breach. But the FSA has been keen to prove its mettle after battling accusations of failing to spot and halt the excessively risky banker behaviour that helped trigger the worst credit crisis since World War Two.

In handing down its largest-ever fine, the FSA said it took into account that the misconduct was not deliberate, that the firm reported the error to the regulator, that it immediately rectified the problem and that it cooperated with the FSA.

Because of its cooperation, the original fine of 47.6 million pounds was reduced by 30 percent, in line with FSA practice.

JP Morgan in London declined to comment