Written By ESR News Blog Editor Thomas Ahearn
On November 21, 2017, the Financial Industry Regulatory Authority (FINRA) – which regulates brokerage firms doing business in the U.S. – announced it had fined J.P. Morgan Securities, LLC $1.25 million for failing to conduct adequate background checks on approximately 8,600, or 95 percent, of its non-registered associated persons from January 2009 to May 2017, according to a news release from FINRA.
FINRA found J.P. Morgan did not fingerprint roughly 2,000 of its non-registered associated persons in a timely manner for more than eight years, preventing them from determining if those persons might be disqualified from working at the firm. The firm fingerprinted other non-registered associated persons but limited its screening to criminal convictions specified in federal banking laws and an internal list.
Overall, FINRA found J.P. Morgan did not appropriately screen 8,600 individuals for all felony convictions or for disciplinary actions by financial regulators. FINRA also found that four individuals who were subject to a statutory disqualification because of a criminal conviction were allowed to associate, or remain associated, with the firm during the relevant time period. One stayed at the firm for 10 years.
“FINRA member firms play an important gatekeeper role in keeping bad actors from harming investors. Firms have a clear responsibility to appropriately screen all employees for past criminal or regulatory events that can disqualify individuals from associating with member firms, even in a non-registered capacity,” Susan Schroeder, Executive VP of FINRA’s Department of Enforcement, said in the FINRA news release.
Federal securities laws require broker-dealers to fingerprint certain associated persons working in a non-registered capacity to help identify if a person has been convicted of crimes that would disqualify them from being associated with a firm, absent explicit regulatory approval. Federal banking laws require banks to conduct similar checks on banking employees using a more limited list of disqualifying events.
In determining the monetary sanction, FINRA considered J.P. Morgan’s cooperation in self-reporting and addressing the violations. J.P. Morgan neither admitted nor denied the charges, but consented to FINRA’s findings. Investors can learn more about FINRA-registered brokers or brokerage firms by using FINRA’s BrokerCheck at no charge by calling (800) 289-9999 or visiting www.finra.org/brokercheck.
Overseen by the Securities and Exchange Commission (SEC), FINRA writes rules and enforces compliance with federal securities laws, registers broker-dealer personnel, and offers them education and training, and informs the investing public. FINRA also administers a dispute resolution forum for investors and brokerage firms and their registered employees. For more information, visit www.finra.org.
Employment Screening Resources® (ESR) – a leading global background check firm – undergoes annual SOC 2® audit reports to confirm the company meets high standards set by the American Institute of Certified Public Accountants (AICPA) for protecting the privacy, security, and accuracy of consumer information used in background checks. For more information, visit www.esrcheck.com.
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