J.P. Morgan Securities LLC (JPMS) has agreed to pay a fine of US $900,000 to the Commodity Futures Trading Commission to resolve charges that it failed to supervise its staff’s handling of exchange fees charged to customers from 2010 through 2014.
According to the CFTC, while J.P. Morgan was trying to enhance its exchange fee reconciliation process in 2014, the registered futures commission merchant identified that it had failed to properly supervise the processing of exchange and clearing fees it charged customers for trading CME and other exchanges’ products.
In agreeing to JPMS’ offer of settlement, the CFTC acknowledged that the firm self-reported the problem to the regulator, and had provided refunds to almost all adversely affected customers.
The CFTC claimed that during the relevant time period, JPMS did not hire qualified nor enough personnel to conduct and oversee its fee reconciliations process which was largely manual and carried out by only one employee at the end of the month. In many cases, it turned out that the firm accrued for overcharges to its customers and this led to aggregate surcharges of approximately $7.8 million.
In a press release announcing the action, the US watchdog stated that this settlement is the CFTC’s third enforcement action grounded on a clearing firm’s supervisory failures over fee processing. In August 2016, the Commission ordered Barclays Capital, Inc. to pay an $800,000 penalty relating to the processing of exchange and clearinghouse fees charged to the firm’s customers. It also imposed a $1.2 million fine against Merrill Lynch, Pierce, Fenner & Smith Incorporated for similar issues back in August 2014.