J.P. Morgan Securities LLC

J.P. Morgan Securities LLC was fined $3,000,000 for failing to accurately report short interest positions to FINRA. The findings stated that the firm’s inaccurate reporting resulted from multiple causes that each impacted the firm’s short interest reporting at different intervals.

In certain instances, the firm overreported its short interest positions. The firm incorrectly reported short interest positions of certain customers of its non-U.S. broker-dealer affiliates on a net basis rather than a gross basis, incorrectly included in its short interest reporting certain positions resulting from stock loan activity, and included in its short interest reporting certain transactions in the prime brokerage accounts of a client that related to incorrectly identified external transfers, rather than reportable trading activity.

Further, the firm overreported short interest positions that were ineligible for reporting since the positions related to dividend reinvestment activity, rather than trading activity. In other instances, the firm underreported its short interest positions.

The firm incorrectly excluded positions in Canadian and Latin American securities held in certain accounts from its short interest reporting logic.

The firm also excluded from its short interest reporting certain positions in over-the-counter (OTC) foreign securities that were dually listed.

The firm also incorrectly excluded from its short interest reporting certain positions in an affiliate’s omnibus account held at the firm. The firm has remediated these issues.

The findings also stated that the firm failed to establish and maintain a supervisory system, including WSPs, reasonably designed to achieve compliance with its short interest reporting obligations.

Prior to 2020, the firm did not have a process in place to periodically review whether accounts were properly included or excluded for purposes of short interest reporting.