The Monetary Authority of Singapore (MAS) has imposed a civil penalty of $2.4 million on JPMorgan Chase Bank, N.A. (JPM), for failing to prevent and detect misconduct committed by its relationship managers (RMs).
In 24 over-the-counter (OTC) bond transactions between Nov 2018 and Sept 2019, the RMs had made inaccurate or incomplete disclosures to clients, resulting in the clients being charged spreads that were above the bilaterally agreed rates.
This enforcement action on JPM follows MAS’S review of pricing and disclosure practices in the private banking industry. Investigations found that for OTC bond transactions, JPM’s practice was to charge clients a spread over the interbank prices.
As the interbank prices were not available to clients, they had to rely on the RMs’ representations to them regarding the interbank prices and spreads.
JPM did not establish adequate processes and controls to ensure that its RMs adhered to pre-agreed spreads with clients when executing OTC bond transactions on their behalf.
MAS sampled OTC bond transactions conducted by JPM’s RMs and found that in the 24 transactions, RMs had either misrepresented the price components or omitted material information that the spreads charged were above the agreed rates, in contravention of sections 201(c) and 201(d) of the Securities and Futures Act (SFA), MAS says.
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In response, JP Morgan Private Bank says it is "pleased" this case has been resolved.
Upon completion of its internal review in 2020, the bank has fully reimbursed affected clients - a very small portion of the total trades processed during the related period.
JP Morgan Private Bank has also updated its internal controls, monitoring and training framework.
