InvestmentsMay 30 2013

FCA fines JP Morgan £3m over suitability concerns

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According to the City watchdog’s statement, the penalty of £3,076,200 relates to deficiencies in systems and controls over two years.

The issues included a lack of relevant and up-to-date information on client files, an inadequate computer-based record system that could not retain enough information, and incomplete suitability reports.

According to the FCA, the firm did not carry out proper risk and compliance monitoring, with shortcomings left unaddressed until after February 2012. In addition, clients also had not always been sent communications to confirm their suitability profiles.

The FCA statement said it uncovered the problems while carrying out its thematic review into wealth management firms and the suitability of their advice.

The regulator confirmed that JP Morgan International Bank had taken “prompt” action to resolve the issues and improve its systems, which led to a “significant overhaul” of its suitability processes.

Tracey McDermott, director of enforcement and financial crime for 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 recognise this.

“Firms that 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.”

Adviser view

Anna Sofat, director of London-based Addidi Wealth, said: “This is not surprising. The wealth management sector has been regulated with a much lighter touch in comparison to advisers. But DFMs started to see the writing on the wall in time for RDR and spent a lot of time on getting resources, systems and staff sorted out.”