JP Morgan Securities, LLC ("JPMS"), a registered futures commission merchant and swap dealer, agreed to pay a $900,000 civil monetary penalty to settle CFTC charges that it failed to implement and maintain adequate systems for reconciling exchange and clearing fees. The CFTC determined that the firm committed supervisory failures because it did not have automated systems capable of accurately reconciling invoices from exchanges and clearinghouses with the amounts of fees that it actually charged to customers for trading and clearing of Chicago Mercantile Exchange products.
The CFTC determined that JPMS did not pay rebates with respect to certain exchange-traded products in a timely manner. According to the Order, the firm permitted employees to "establish and maintain exchange fee reconciliations that were inaccurate and faulty," and ultimately overcharged certain customers the aggregate amount of approximately $7.8 million. The CFTC acknowledged that JPMS self-reported the problem to the Commission and took remedial steps to rectify the situation, such as providing refunds to affected customers.
Commentary / Steven Lofchie
The process of reconciling various charges and fee amounts on a transaction-by-transaction basis can be extremely difficult and technology-intensive. In light of this action, other firms may wish to investigate whether they have similar issues.
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