J.P. Morgan & SpeedRoute Settle FINRA Violations

Key Takeaways

• J.P. Morgan Violations: Failed to submit timely and accurate notifications under FINRA Rule 5190, violating Regulation M in 250 instances.
• SpeedRoute Violations: Failed to establish risk management controls and supervisory procedures for market access activities, and did not implement a reasonable anti-money laundering program.
• Sanctions: J.P. Morgan was fined $150,384 (resolved simultaneously with similar matters for a total fine of $650,000), while SpeedRoute was fined $300,000 (with $75,000 payable to FINRA).
• Corrective Actions: Both firms have taken steps to enhance their compliance frameworks, including revising supervisory procedures and implementing stricter AML and risk management controls.

Deep Dive

In separate settlements with the Financial Industry Regulatory Authority (FINRA), both J.P. Morgan Securities LLC and SpeedRoute LLC have agreed to pay fines for violations of FINRA rules and federal securities regulations. These settlements address deficiencies in supervisory systems, failure to adhere to reporting requirements, and lapses in financial and risk management controls.

J.P. Morgan Securities LLC Settlement

J.P. Morgan Securities faced violations for failing to timely and accurately file securities-related notifications under FINRA Rule 5190 between April 2020 and March 2022. These violations occurred in connection with the firm’s participation in securities distributions subject to Regulation M under the Securities Exchange Act of 1934. The firm failed to properly submit or filed late and inaccurate notifications in 250 instances.

Additionally, from August 2020 to January 2024, the firm was found to have failed in its supervisory systems and written procedures (WSPs) to ensure compliance with FINRA Rule 5190, particularly in relation to the timeliness and accuracy of notifications.

Following the violations, J.P. Morgan undertook corrective measures, updating its deal management system, revising its WSPs, and ensuring more robust supervision of its filing procedures. Between March 2022 and January 2024, the firm corrected system inaccuracies, and implemented new policies to ensure notifications were reviewed for accuracy and filed on time.

J.P. Morgan agreed to a fine of $150,384, which resolves these violations, along with a censure. The firm waived any right to claim an inability to pay and is expected to settle the fine promptly. This fine is part of a larger $650,000 penalty resolved simultaneously with other similar matters.

SpeedRoute LLC Settlement

SpeedRoute, a market access and execution services provider, faced violations in multiple areas between 2017 and 2024. These violations included the failure to establish and maintain adequate risk management controls and supervisory procedures as required by federal securities laws, particularly Exchange Act Rule 15c3-5, FINRA Rules 3110 and 2010, and the Bank Secrecy Act (BSA).

From April 2022 to the present, SpeedRoute failed to implement proper financial risk management controls for its market access business and neglected to monitor credit limits appropriately. Furthermore, SpeedRoute was found to have failed to establish a robust anti-money laundering (AML) program to detect and report suspicious transactions, particularly involving low-priced securities and foreign financial institution (FFI) clients.

The firm’s supervisory system for detecting potentially manipulative trading was also found to be inadequate. The surveillance model was not designed properly, and alerts for potentially manipulative trading activities like layering and spoofing were not reviewed thoroughly, resulting in delayed or inadequate investigations.

SpeedRoute has been fined $300,000, of which $75,000 will be paid to FINRA. This fine comes after several earlier settlements, including a $310,000 fine in May 2021 for similar supervisory lapses. In addition to the fine, the firm has agreed to a censure and has been ordered to implement a revised and more robust compliance framework, particularly for AML monitoring and financial risk management.

FINRA acknowledged SpeedRoute’s limited financial ability to pay the full fine, and the monetary sanctions were adjusted accordingly. The firm agreed to the fine and the sanctions under the condition that no future actions will be taken based on the same factual findings, should the settlement be accepted.

These settlements highlight the critical importance of maintaining comprehensive compliance and supervisory systems, particularly for firms involved in market access and securities distribution. Both J.P. Morgan and SpeedRoute failed in key areas of regulatory adherence, underscoring the importance of robust risk management and regulatory reporting procedures.

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