The UK's Financial Conduct Authority has fined JP Morgan International Bank a total of £3.08 million (around $4.6 million) for systems and controls failings at its wealth management business.

The UK's Financial Conduct Authority has fined JP Morgan International Bank a total of £3.08 million (around $4.6 million) for systems and controls failings at its wealth management business.

The failings persisted for two years and were not corrected until the FCA brought them to the firm’s attention in the course of its thematic review into wealth management firms and the suitability of their advice.

The FCA identified a number of issues with JPMIB’s processes and an inability to demonstrate client suitability from its client files, the firm said in a statement.

Among the issues identified by the FCA were: client files which were not kept up to date or that did not retain important client suitability information, a computer-based record system that did not allow sufficient information to be retained, suitability reports that failed adequately to contain a statement of the client’s demands and needs, and the fact that communications to confirm client suitability profiles were not always sent to the client (as required by JPMIB’s own policy).

“No matter who they are, customers of wealth managers should be able to expect the firm to keep complete, up to date client records so that they can give the right advice. In this case the firm did not have complete records, nor did its management have the information they needed to recognize this,” said Tracey McDermott, director of enforcement and financial crime.

“Firms which fail to keep the right records expose their clients to the risk of inappropriate investments and have no way of checking whether their advice has been appropriate,” said McDermott.

While the fine relates to client records, it highlights a growing issue for firms in the era of online communications: that of storing and archiving information properly to meet regulatory requirements. In the US, LPL Financial was this week handed a fine from the Financial Industry Regulatory Authority over flaws in its email review and retention systems. And in another systems and controls-related case to hit the news this week, five broker-dealers have just reached a settlement with Massachusetts over the sales of non-traded REITs to investors in the state. 

In the JP Morgan case, after the FCA identified the failings at International Bank, it instructed the firm to appoint a “skilled person” to conduct an assessment of the adequacy and effectiveness of its systems and controls. Its report found a number of deficiencies, including those set out above. 

JPMIB said that it subsequently took prompt action to resolve the issues and improve its systems, including carrying out the FCA’s recommendations.