Release Number 5713-09
For Release: September 9, 2009
CFTC Sanctions J.P. Morgan Futures, Inc. $300,000 for Failing to Properly Segregate Customer Funds and Failing to Timely Report the Under-segregation to the CFTC
J.P. Morgan Futures, Inc., a registered futures commission merchant, drew upon customer segregated funds beyond its actual interest, resulting in customer funds being commingled with its funds. The FCM also failed to diligently supervise the handling of customer funds held in segregation.
Washington, DC — The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing and simultaneous settlement of charges against J.P. Morgan Futures, Inc. (JPMF), a registered futures commission merchant, for violating rules governing segregation of customer funds, timely computation of its segregation obligations, timely reporting of under-segregation deficiency to the CFTC and diligent supervision of its employees.
The CFTC order imposes a $300,000 civil monetary penalty on JPMF. The order also requires JPMF to implement enhanced procedures to assure adherence to rules governing segregation of customer funds.
In 2007, JPMF maintained accounts for customer funds (segregated accounts) and kept its own funds in separate accounts. During this time, JPMF processed transactions related to the delivery of Treasury notes that resulted in JPMF’s segregated accounts being insufficiently funded by approximately $750 million. That is, JPMF drew upon customer segregated funds beyond its actual interest, which resulted in customer funds being commingled with JPMF’s funds.
JPMF also failed to timely complete computing its segregation requirements and did not timely notify the CFTC that its segregated accounts had been insufficiently funded. JPMF did not have a process in place to determine the impact of expected withdrawals from the segregated accounts on the amount required to be kept in segregation.
JPMF has since enhanced existing procedures by implementing a segregation forecasting process to ensure that proper segregation is maintained.
The following CFTC Division of Enforcement staff was responsible for this case: Eliud Ramirez, David Oakland, W. Derek Shakabpa, Nathan B. Ploener, Manal Sultan, Lenel Hickson Jr. and Vincent A. McGonagle. The Division thanks Ronald Carletta, William Tylinski and John Adair of the Division of Clearing and Intermediary Oversight for their assistance in this investigation.
Last Updated: September 9, 2009