SFC reprimands and fines two JP Morgan entities HK$5.6 million for regulatory breaches

20 Oct 2016



The Securities and Futures Commission (SFC) has reprimanded J.P. Morgan Securities (Asia Pacific) Limited (JPMSAP) and JPMorgan Chase Bank, National Association (JPMCB), and fined them $3 million and $2.6 million respectively for regulatory breaches including disclosure failures in research reports and offering offshore listed index options without the required licences (Notes 1 & 2).

The SFC’s investigations into the conduct of JPMSAP and JPMCB found the following breaches:

Disclosure of financial interests and market making activities in research reports

Offering of offshore index options without Type 2 and/or Type 5 registration

Delay in reporting breaches to the SFC

In determining this disciplinary action, the SFC took into account that:

End

Notes:

  1. JPMSAP is a registered institution under the Securities and Futures Ordinance (SFO) to carry on business in Type 1 (dealing in securities), Type 4 (advising on securities), Type 6 (advising on corporate finance) and Type 7 (providing automated trading services) regulated activities.
  2. JPMCB is a registered institution under the SFO to carry on business in Type 1 (dealing in securities), Type 4 (advising on securities), Type 6 (advising on corporate finance) and Type 9 (asset management) regulated activities.
  3. Paragraph 16.5(a) of the Code of Conduct for Persons Licensed by or Registered with the SFC (Code of Conduct) provides that where a firm has any financial interests in relation to an issuer or a new listing applicant the securities in respect of which are reviewed in a research report, and such interests aggregate to an amount equal to or more than 1% of the issuer’s market capitalization (or the new listing applicant’s issued share capital), the firm should disclose that fact in the research report.
  4. Paragraph 16.5(b) of the Code of Conduct requires a firm that makes, or will make, a market in the securities in respect of the issuer or the new listing applicant to disclose that fact in the research report.  Paragraph 16.10(a) of the Code of Conduct requires such disclosure to be clear, concise and specific.
  5. During the relevant period, JPMCB offered to its clients offshore listed index options that referenced stock indices.  The SFC considers that the products were futures contracts for the purpose of the SFO.
  6. Under paragraph 12.5 of the Code of Conduct, a licensed corporation or registered institution is required to report to the SFC immediately upon the happening of any material breach, infringement of or non-compliance with any rules, laws, regulations and codes administered or issued by the SFC, or where it suspects any such breach, infringement or non-compliance by itself or persons it employs or appoints to conduct business with clients.

A copy of the Statement of Disciplinary Action is available on the SFC website



Page last updated : 20 Oct 2016