The FCA said the £3,076,200 fine was for systems and controls failings relating to its provision of retail investment advice and portfolio management services.
Tracey McDermott, director of enforcement and financial crime at the FCA, said: “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.
“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.”
The City watchdog said JPMIB’s failings persisted for two years and were not corrected until they were brought to the company’s attention by the FCA during the course of its thematic review into wealth management firms and the suitability of their advice.
The FCA said it identified a number of issues with JPMIB’s processes and an “inability to demonstrate client suitability from its client files”.
During this period, continued the FCA, JPMIB’s senior management did not have sufficient information and oversight tools to identify and address these deficiencies. The FCA added, that although no detriment to customers has been identified to date, the failings exposed customers to the risk that they would be given incorrect advice and inappropriate investments.
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 (e.g. client objectives, capacity for loss and investment experience);
- 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, explain why the investment was suitable to meet those needs or indicate any disadvantages of the investment; and
- communications to confirm client suitability profiles were not always sent to the client (as required by JPMIB’s own policy).
In addition, JPMIB did not ensure that there was adequate risk and compliance monitoring and oversight of its business. While some issues were identified by monitoring, they were not adequately addressed until after February 2012.
The fine is only £500,000 short of the £3.5m fine handed to Martin Currie this time last year. Martin Currie’s fine remains the largest fine given to an asset management company for failing to manage a conflict of interest. Martin Currie was also fined £5.1m by the US Securities and Exchange Commission.
A spokesperson for JPMIB said: “We have fully cooperated with the FCA and have enhanced our procedures to ensure that they are compliant with regulatory requirements. As the FCA has noted in its press release, there has been no detriment to customers identified to date.”
