PwC Fined $2.17 Million by U.K. Regulator Over JPMorgan Client-Money Audit
PricewaterhouseCoopers LLP was fined a record 1.4 million pounds ($2.17 million) for failures concerning reports on client-money accounts at JPMorgan Chase & Co. (JPM)’s London securities unit.
PwC’s “acts of misconduct merit a severe reprimand,” the Accountancy & Actuarial Discipline Board said in a judgment released today. PwC failed to notice that J.P. Morgan Securities Ltd. hadn’t properly segregated an average of $8.6 billion of client funds from the firm’s accounts in reports to the U.K.’s Financial Services Authority for the seven years through 2008.
JPMorgan discovered the error in 2009 and reported it to PwC and the FSA, which fined the bank a record 33.3 million pounds in 2010. The U.K. financial regulator has focused on client-money segregation after the winding up of Lehman Brothers Holdings Inc.’s former European unit was slowed by years of litigation among creditors fighting over the issue.
“We regret that one aspect of our work on the private client money report to the FSA fell beneath our usual high standards,” PwC said in an e-mailed statement. “When the issue was identified, and before any complaint had arisen, we took action to ensure that staff received additional training in the client monies area.”
The AADB, the U.K.’s audit regulator, sought a record fine against PwC to top the 1.2 million-pound sanction against Coopers & Lybrand LLP in 1999. The tribunal also ordered that PwC pay costs to the AADB totaling 83,902 pounds.
Due Skill, Care
“PwC accepted that it did not carry out its professional work in relation to these reports with due skill, care and diligence,” the AADB said in an e-mailed statement. The firm earned a reduction in the fine, which would have been 2 million, for cooperating.
The AADB is probing PwC in a similar investigation into whether the firm’s reports on client assets at Barclays Capital Securities Ltd. broke financial rules.
The FSA fined the U.K. bank 1.12 million pounds in January 2011 for failing to put as much as 752 million pounds a day of client money into protected accounts that were separate from its own money-market deposits.
PwC compiled reports to the regulator between 2001 and 2009 outlining Barclays Capital’s compliance with client-asset separation rules.
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