J.P. Morgan Securities was fined $1.25 million by the Financial Industry Regulatory Authority on Tuesday for failing to conduct “timely or adequate background checks” on approximately 8,600, or 95%, of its non-registered associated persons.
According to the FINRA action, for more than eight years – from January 2009 to May 2017— J.P. Morgan failed to fingerprint about 2,000 of its non-registered associated persons in a timely manner, preventing the brokerage firm from determining whether those persons could have been deemed unsuitable to work at the firm.
In addition, the firm fingerprinted other non-registered associated persons but “limited its screening to criminal convictions specified in federal banking laws and an internally created list,” FINRA said.
In total, FINRA states that J.P. Morgan “did not appropriately screen 8,600 individuals for all felony convictions or for disciplinary actions by financial regulators.”
Due to the inadequate screening, FINRA said that “four individuals who were subject to a statutory disqualification because of a criminal conviction were allowed to associate, or remain associated, with the firm during the relevant time period.”
One of the four individuals was associated with the firm for 10 years, and another for eight years.
Broker-dealers are required under federal securities laws to fingerprint certain associated persons working in a non-registered capacity who may present a risk to customers based on their positions.
“FINRA member firms play an important gatekeeper role in keeping bad actors from harming investors. Firms have a clear responsibility to appropriately screen all employees for past criminal or regulatory events that can disqualify individuals from associating with member firms, even in a non-registered capacity,” said Susan Schroeder, executive vice president of FINRA’s enforcement department
In determining the appropriate monetary sanction, FINRA said that it considered J.P. Morgan’s cooperation in self-reporting and undertaking a plan to address the violations.
In settling the matter, J.P. Morgan neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.