JP Morgan censured by NYSE regulation and fined $150,000

NEW YORK – In mid-June, JP Morgan Securities, based in New York, was censured by NYSE-Euronext's regulatory arm, NYSE Regulation. The authority also imposed a fine of $150,000, and the securities firm consented to the regulatory actions without admitting or denying guilt to findings of inaccurate reserve account and net capital computations and other violations.

A NYSE hearing officer found that from March 2004 through January 2005, the firm experienced difficulties in reconciling accounts following a conversion of its fixed-income processing system from an internal system to a system using an outside vendor. The firm also erroneously concluded that these differences could be treated as bank issues, as opposed to securities clearance issues.

Accordingly, the firm failed to include, when computing its net capital and reserve account requirements, certain aged items that were not paired-off in the reconciliation process.

As a result, the firm experienced a net capital deficiency of approximately $464 million as of March 31, 2004, and a reserve account deficiency of approximately $1.7 billion as of April 16, 2004.

Moreover, following the conversion, some of the firm's books and records were inaccurate because it failed to identify and resolve these unpaired differences on time. In addition, JP Morgan Securities also submitted an inaccurate Key Operational Indicator Report to the NYSE after the conversion, because the firm had reported its reconciliation differences on a net, rather than gross, basis.

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