The FCA has published a Final Notice imposing a financial penalty of £3,076,200 (Stage 1: 30% discount) on JP Morgan International Bank Limited (“JPMIB”) for its determination of systems and controls failings in the gathering and recording of client suitability information (i.e. client risk profiles, to be applied when determining the suitability of an investment for a particular client). The FCA concluded that the failings could be traced to a variety of factors, including deficiencies in the software used for recording client suitability data, inadequate training on obtaining and recording client suitability information, inadequate risk and compliance oversight, and insufficient senior management oversight. The FCA determined that the behaviour breached Principle 3 and SYSC 9.1.1R.
In determining the penalty, the FCA considered the seriousness of the breach to be Level 2 (out of 5, with 5 being the most serious), and recognised considerable mitigating factors including JPMIB’s close cooperation with the FCA investigation, JPMIB’s implementation of certain recommendations to improve its systems, and JPMIB’s conducting of a past business review in order to assess any impact on clients of the systems failings. It was especially noted that, of the 1,416 client relationships reviewed as part of that past business review (as at the date of the Final Notice), only one was identified as having given rise to an unsuitable investment (which JPMIB was discussing with the relevant client).
It was also specifically noted in the Final Notice that “despite the deficiencies in the Firm’s record keeping and suitability process, its advisers were able to demonstrate a good understanding of customers’ objectives and did in practice conduct accurate risk profiling of clients, whose accounts were then generally managed in accordance with those profiles.”