J.P. Morgan Stung by Finra for Fingerprint Failure
J.P. Morgan Securities failed to fingerprint or otherwise conduct adequate background checks on 95% of its nonregistered employees from 2009 through this May, creating potential risk to the broker-dealer’s customers, the Financial Industry Regulatory Authority said on Tuesday.
The regulator fined J.P. Morgan $1.25 million, saying its failure to conduct the checks for felony convictions and disciplinary actions by regulators on about 8,600 employees from the beginning of 2009 through last May violated federal securities laws.
“FINRA member firms play an important gatekeeper role in keeping bad actors from harming investors,” Susan Schroeder, an executive vice president of the enforcement division, said in a prepared statement. “Firms have a clear responsibility to appropriately screen all employees for past…events that can disqualify individuals from associating with member firms, even in a non-registered capacity.”
J.P. Morgan’s cooperation in self-reporting the lapses and undertaking a remedial plan played a role in determining the fine, Finra said. Spokespeople at the bank-owned broker-dealer, which neither admitted nor denied the findings, declined to comment.
Finra found that the firm, which in recent weeks hired a slew of high-producing brokers from Morgan Stanley, failed to fingerprint about 2,000 associated persons in a timely manner and limited screening of about 8,600 others to fingerprinting and checks of criminal convictions specified in federal banking laws and against an internally created list.
Securities regulators require checks against a more comprehensive list of disqualifying events, Finra said. Four employees who were subject to a statutory disqualification because of a criminal conviction worked at the firm during the relevant time period, including one who was there for 10 years and another employed for eight years, the regulator said.