The US Commodity Futures Trading Commission has filed and settled charges against J.P.
The US Commodity Futures Trading Commission has filed and settled charges against J.P. Morgan Futures, a registered futures commission merchant, for violating rules governing segregation of customer funds, timely computation of its segregation obligations, timely reporting of under-segregation deficiency to the CFTC and diligent supervision of its employees.
The CFTC order imposes a USD300,000 civil monetary penalty on JPMF. The order also requires JPMF to implement enhanced procedures to assure adherence to rules governing segregation of customer funds.
In 2007, JPMF maintained accounts for customer funds and kept its own funds in separate accounts. During this time, JPMF processed transactions related to the delivery of Treasury notes that resulted in JPMF’s segregated accounts being insufficiently funded by approximately USD750m. That is, JPMF drew upon customer segregated funds beyond its actual interest, which resulted in customer funds being commingled with JPMF’s funds.
JPMF also failed to timely complete computing its segregation requirements and did not timely notify the CFTC that its segregated accounts had been insufficiently funded.
JPMF did not have a process in place to determine the impact of expected withdrawals from the segregated accounts on the amount required to be kept in segregation.
The company has since enhanced existing procedures by implementing a segregation forecasting process to ensure that proper segregation is maintained.
