MAS imposes civil penalty of $2.4 million on JPMorgan Chase Bank for relationship manager misconduct

The Monetary Authority of Singapore (MAS) announced on 2 December 2024 that JPMorgan Chase Bank, N.A. (JPM) has been fined S$2.4 million for failing to detect and prevent misconduct by its relationship managers (RMs).

The violations occurred during 24 over-the-counter (OTC) bond transactions where clients were charged spreads exceeding pre-agreed rates.

According to MAS, the RMs provided inaccurate or incomplete information to clients about the pricing components of these transactions.

This misconduct resulted in clients unknowingly paying spreads higher than what was bilaterally agreed. The violations contravened sections 201(c) and 201(d) of the Securities and Futures Act (SFA), which regulate transparency and fair dealing in financial services.

The misconduct came to light during MAS’s review of pricing and disclosure practices in the private banking sector.

MAS revealed that JPMorgan’s processes for determining and disclosing spreads were inadequate.

Clients depended on RMs’ representations of interbank prices, as such prices were not accessible to them. JPMorgan failed to ensure that its RMs adhered to the agreed pricing terms.

Investigations found systemic lapses in JPMorgan’s pricing frameworks and internal controls.

These weaknesses enabled the RMs to misrepresent price components or withhold material information, thereby violating client trust. MAS sampled the bank’s OTC bond transactions and confirmed that 24 cases involved such breaches.

JPMorgan has admitted liability under section 236C of the SFA for its failure to monitor and prevent these actions.

As part of the resolution, the bank paid the civil penalty to MAS and refunded the overcharged fees to affected clients.

Additionally, JPMorgan has implemented measures to strengthen its pricing controls and ensure compliance. These enhancements aim to prevent similar issues from recurring.

In a statement provided to the media, JPMorgan acknowledged the findings of MAS’s review, describing them as part of an industry-wide thematic inspection.

“As part of an industry-wide thematic inspection, JP Morgan Private Bank participated in a review that found certain deficiencies in past pricing and disclosure practices,” the bank stated.

JPMorgan highlighted that after completing its own internal review in 2020, it fully reimbursed affected clients. The transactions in question represented “a very small portion of the total trades processed during the related period,” the bank added.

To address the deficiencies, JPMorgan stated that it has “undertaken a comprehensive update to its internal controls, monitoring, and training framework” to enhance trade governance, pricing transparency, and compliance practices.

“We are pleased to have this matter resolved and remain dedicated to delivering an exceptional experience for our clients,” the bank noted.

MAS stated that investigations into the individual relationship managers responsible for the misconduct are still ongoing.

The regulatory body emphasised the importance of robust internal controls in financial institutions to uphold transparency and fair dealing.

In its press release, MAS clarified that a civil penalty action is distinct from a criminal proceeding and does not attract criminal sanctions.

The civil penalty regime, operational since 2004, was designed to complement criminal sanctions, offering a nuanced approach to addressing market misconduct.

Under section 232 of the Securities and Futures Act (SFA), MAS may enter into an agreement with any party to pay a civil penalty for contravening provisions under Part 12 of the Act, with or without admission of liability.

The penalty can be up to three times the profit gained or loss avoided as a result of the contravention, subject to a minimum of S$50,000 for individuals and S$100,000 for corporations.