The Securities and Futures Commission in Hong Kong has reprimanded J.P. Morgan Securities and J.P. Morgan Chase Bank for regulatory breaches. The entities were also hit with a substantial fine.
Hong Kong’s Securities and Futures Commission (SFC) has reprimanded J.P. Morgan Securities (Asia Pacific) (JPMSAP) and J.P. Morgan Chase Bank, (JPMCB), and fined them $3 million and $2.6 million respectively for regulatory breaches including disclosure failures in research reports and offering offshore listed index options without the required licences.
JPMSAP has now taken remedial measures to rectify the deficiencies in its securities position reporting system; and JPMCB has stopped offering offshore listed index options to clients.
Delay in Reporting Breaches
JPMSAP and JPMCB did not report the breaches or suspected breaches to the SFC in a timely manner as required under the Code of Conduct. In both instances, JP Morgan self-reported the breaches to the SFC around five months after discovery of the breaches.
The regulator’s investigation into the conduct of both institutions found that JPMSAP failed to disclose J.P. Morgan’s financial interests in respect of certain listed issuers covered in its research reports.
Acted Without Required Licences
The failure was caused by deficiencies in J.P. Morgan’s global securities position reporting system which failed to include stock borrow and options positions in the calculation of positions in relevant securities.
The firm was also hit for offering offshore index options without Type 2 and/or Type 5 registration. Between 1 April 2003 and 22 July 2015, JPMCB offered certain offshore listed index options to its clients without the requisite registration.
