JPMorgan Securities agreed to pay $750,000 to resolve claims made by the Financial Industry Regulatory Authority (FINRA) that five erroneous orders were placed with exchanges or alternative trading platforms due to insufficient financial risk management controls and supervisory processes.
The broker-dealer's financial risk management controls were "not reasonably designed to prevent certain erroneous orders that exceeded appropriate price or size parameters, on an order-by-order basis or over a short period of time, or that indicated duplicative orders," according to FINRA's order released on Monday. This occurred from January 2019 to July 2022.
The $750,000 penalty will be split between Nasdaq and FINRA, with $187,500 going to FINRA, according to the order.
In two cases, traders ordered equities shares at the wrong price. Three further instances involved clients submitting orders that were either clearly erroneous or in excess of the daily sales limit, yet those orders were still carried out by traders.
JPMorgan's average daily sales quantity limitations "were too large to be effective, and the firm failed to provide any documented rationale for why it set them at such levels," according to FINRA. Furthermore, the firm's supervisory standards for handling a soft block on such sales, which pauses the sale until it can be examined, "did not address how to handle, document, and review soft block overrides."
According to FINRA, the company lacked the necessary controls to enforce limit price levels or stop duplicate orders.
The firm "implemented additional controls to prevent the entry of orders that—based on price and/or size of the order relative to the market—could potentially lead to unintended market impact," the order stated. This was done in July 2022.
According to the decision, this is the third instance since 2017 in which JPMorgan has received a fine from FINRA or an exchange for violations of a similar nature.
A request for comment from JPMorgan Securities was not met with a response. The company did not admit or deny FINRA's findings.
By fLEXI tEAM