OCC Imposes $250 Million Penalty on JPMorgan Chase Bank for Surveillance Failures

The Office of the Comptroller of the Currency (OCC) has levied a $250 million civil money penalty against JPMorgan Chase Bank, N.A. (JPMC) for deficiencies identified in its trade surveillance program. The penalty, announced today, reflects the OCC's findings of shortcomings in JPMC's trading venue coverage and data controls essential for an effective trade surveillance program.

According to the OCC's investigation, JPMC operated with significant gaps in its coverage of trading venues and lacked the necessary data controls required to maintain a robust trade surveillance program. Trading venues, which serve as platforms facilitating transactions in financial instruments, are integral to the market conduct risk control framework of banks. However, JPMC's failure to adequately surveil billions of instances of trading activity across at least 30 global trading venues has been deemed by the OCC as constituting unsafe or unsound banking practices.

In response to these findings, the OCC has issued a cease and desist order mandating comprehensive corrective actions from JPMC. The order necessitates the rectification of identified deficiencies, obtaining prior approval from the OCC before onboarding new trading venues, and commissioning an independent third party to conduct an assessment of the bank's trade surveillance program.

It's notable that the OCC's enforcement actions are independent of, yet coordinated with, the actions taken by the Board of Governors of the Federal Reserve System, which also announced enforcement measures against JPMorgan Chase & Co. today.

The $250 million penalty imposed by the OCC has been disbursed to the U.S. Department of the Treasury as per regulatory requirements.

JPMorgan Chase Bank, N.A. has yet to respond publicly to the OCC's enforcement actions or provide details regarding the corrective measures it intends to undertake in light of the findings. However, the OCC's enforcement underscores the regulator's commitment to upholding market integrity and ensuring robust risk management practices within the banking sector.

This development is likely to spark further scrutiny of trade surveillance practices across the banking industry, with heightened expectations for banks to bolster their capabilities in monitoring and mitigating market conduct risks associated with trading activities.

In addition, the Federal Reserve Board on Thursday issued an enforcement action against JPMorgan Chase & Co. and fined the firm approximately $98.2 million for an inadequate program to monitor firm and client trading activities for market misconduct. The Board's action requires JPMorgan Chase to review and take corrective action to address the firm's inadequate monitoring practices, which occurred between 2014 and 2023.

The Board's action was taken in coordination with the Office of the Comptroller of the Currency. The penalties announced by the Board and the Office of the Comptroller of the Currency total approximately $348.2 million.

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