Hong Kong’s market regulator has fined JPMorgan $5.6 million for regulatory breaches including disclosure failures in research reports, in the latest woes of the US lender that is already reeling from allegations about its hiring practices in the region.
Many of the breaches or suspected breaches were not identified or corrected in a timely manner until the SFC brought them to JPMorgan’s attention, the regulator said.
The SFC on Wednesday imposed its fine on two companies under JPMorgan for regulatory breaches. These are J.P. Morgan Securities Asia Pacific Limited (JPMSAP), which was fined $3 million, and another $2.6 million was levied on JPMorgan Chase Bank, National Association (JPMCB).
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An investigation by the SFC revealed that the bank’s systems and control mechanism were inefficient to ensure regulatory compliance across various areas. Failures connected with offering offshore listed index options without the required licenses also occurred, the Securities and Futures Commission said in a statement.
In determining the penalties, the SFC took into account the bank’s cooperation, the steps it took to fix the concerns, the fact that it agreed to take remedial measures to rectify the deficiencies in its reporting system and that it has stopped offering offshore listed index options.
Regarding disclosure of financial interests and market making activities, the lender’s global securities position reporting system failed to include stock borrow and options positions in the calculation of positions in relevant securities.
According to SFC’s findings: “The deficiencies were first identified by JP Morgan in the US in October 2013 and brought to JPMSAP’s attention in January 2014. During the sample year 2013, JPMSAP was required to disclose its financial interests of more than 1% in four listed issuers in 33 research reports, but it failed to do so in 30 of these reports.”
In addition, it was further found that between 1 April 2003 and 22 July 2015, JPMorgan Securities Asia-Pacific offered certain offshore listed index options to its clients without a Type 2 (dealing in futures contracts) and/or Type 5 (advising on futures contracts) registration (Note 5).