The Financial Industry Regulatory Authority fined J.P. Morgan Securities, LLC $1.25 million for failing to conduct proper background checks on 8,600 new employees.
FINRA — Wall Street’s independent regulator — said the due diligence failures started in 2009 and continued until May this year.
Federal securities laws require broker-dealers to fingerprint employees working in a non-registered capacity “who may present a risk to customers based on their positions.”
Fingerprinting helps firms identify if a person has been convicted of crimes that would disqualify them from being associated with a firm, absent explicit regulatory approval.
J.P. Morgan’s due diligence failures involved 95 percent of the firm’s “non-registered associated persons.”
“For more than eight years,” FINRA said, “J.P. Morgan did not fingerprint approximately 2,000 of its non-registered associated persons in a timely manner, preventing the firm from determining whether those persons might be disqualified from working at the firm.”
Some employees who were fingerprinted weren’t properly checked for past criminal convictions.
“In total, the firm did not appropriately screen 8,600 individuals for all felony convictions or for disciplinary actions by financial regulators,” FINRA said.
The firm hired or retained four employees who should have been disqualified because of criminal convictions.
J.P. Morgan settled without admitting or denying FINRA’s charges.
FINRA said it considered J.P. Morgan’s “cooperation in self-reporting and undertaking a plan to address the violations.”
Richard L. Cassin is the publisher and editor of the FCPA Blog.