From October 2008 to July 2012, JP Morgan excluded certain balances that it was supposed to include on reports, as well as included certain balances it was supposed to exclude from the reports. According to FINRA, JP Morgan’s system for preparing reports of customer debit balances in securities margin accounts was inadequate. Reportedly, the systems failed to remain up-to-date with the changes in JP Morgan’s business over the years.
JP Morgan was actually the one that brought the matter up to FINRA after discovering that the balances on its reports were high compared to industry averages. JP Morgan proactively took corrective measures to ensure that the reporting errors were remedied.
FINRA requires all brokerage firms that issue margin accounts to customers to submit monthly reports of these account balances in two parts: total debit balances and total free credit balances. Inaccurate reporting to FINRA is a violation of securities industry regulations.
In the end, the corrected figures were anywhere from three to 27 percent different than what was originally reported for margin debt figures and one to 20 percent different for free credit balance figures.
JP Morgan accepted and consented to FINRA’s findings, agreeing to a censure, a fine of $500,000, and proof of corrective action to ensure future compliance with securities reporting regulations.
Recovering Losses Caused by Investment Misconduct.
