- Fines total HK$30 million after firm cooperates with probe
- Breaches from 2010 to 2013 included naked short-selling
JPMorgan Chase & Co. units were fined HK$30 million ($3.9 million) in Hong Kong for regulatory breaches by the firm’s institutional equities business between 2010 and 2013, including breaking a ban on so-called naked short-selling.
Failures connected with principal trading and dark liquidity pool trading also occurred, the Securities and Futures Commission said in a statement on Tuesday.
Between May 2010 and February 2013, mistakes in aggregating positions to determine whether they were net long or net short resulted in more than 41,000 uncovered short-sale trades being wrongly conducted as long-sale trades, the SFC said. In Hong Kong, “naked” or “uncovered” short selling, where investors short sell a security before borrowing it, is prohibited.
“We have fully co-operated with the SFC and are pleased to have resolved these legacy issues in relation to certain aspects of our systems and controls in the institutional equities business in Hong Kong,” Marie Cheung, a JPMorgan spokeswoman, said in an e-mail. “The firm has strengthened its internal systems and controls to ensure compliance with the prevailing rules and regulations.”
Among other deficiencies described by the SFC:
* A sample review revealed that 34 percent of short-selling orders in May 2012 from two JPMorgan units for principal trading lacked the appropriate “documentary assurance.”
* Between January 2011 and December 2012, JPMorgan lacked adequate systems and controls to prevent client facilitation trades being executed without client consent.
* Agency orders were wrongly mixed with principal orders in dark liquidity pool operations.
The penalties took into account JPMorgan’s cooperation and clean disciplinary record, the regulator said.