Why Did the U.K. Slap JPMorgan With a Fine?

Britain’s Financial Conduct Authority (FCA) has fined JPMorgan Chase (NYSE:JPM) 3.08 million pounds ($4.6 million) for failings in its wealth management division, which was unable to prove that it had been giving clients the right financial advice.

The FCA said the unit had failed to keep adequate records on individuals’ investments, which led to the company giving its clients poor advice. From January 2010 to February 2012 the unit did not keep clients’ files up to date and failed to tell customers about the suitability of financial products.

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Tracey McDermott, the Financial Conduct Authority’s director of enforcement and financial crime, said in a statement, “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.”

The British watchdog group examined 25 customers and found “significant gaps,” including information about how much risk the customers were willing to take on, in 22 of the files. The FCA is set to publish its findings about a wider review of the wealth management sector in Britain as a whole. In the last three years HSBC (NYSE:HBC) and Barclays (NYSE:BCS) have also faced heavy fines for selling inappropriate financial products to their clients.

For now it doesn’t appear that the record-keeping issues had negatively affected any clients, though customers were exposed to the risk of being advised to make inappropriate investments.The FCA did say that JPMorgan took “prompt action” to overhaul how it determines which investments are appropriate for clients and to improve its record keeping practices after the failings were pointed out.

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JPMorgan is also facing regulatory problems in the U.S. At least eight federal agencies, including the Federal Regulatory Energy Commission, are investigating the company over charges that the bank misrepresented energy prices in several states.

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