JPMorgan resolves trade surveillance matter with the CFTC for $100 million

On May 23, 2024 the U.S. Commodity Futures Trading Commission (CFTC or Commission) announced a resolution with J.P. Morgan Securities LLC (JPM) regarding JPM’s trade surveillance program. In 2021, JPM discovered that its surveillance on multiple trading venues and systems was not operating correctly, resulting in gaps in JPM’s trade surveillance on these venues and systems. JPM promptly disclosed the issue to its regulators, including the CFTC, and conducted a comprehensive review of its surveillance processes that later led to the discovery of additional gaps. Following JPM’s self-disclosure, the CFTC’s Division of Enforcement began investigating the matter in 2022. The resolution, which charges JPM with failing to diligently supervise its business as a Commission registrant, in violation of 17 C.F.R. § 166.3, follows nearly seven months of significant advocacy and negotiations with the Division of Enforcement. This advocacy resulted in the CFTC reducing its penalty demand from $300 million to $100 million and removing prejudicial language in the order related to JPM’s representations to the Commission about its remediation in connection with a prior resolution. In March 2024, JPM’s affiliates entered into resolutions with respect to this matter with the Office of the Comptroller of the Currency (OCC) for $250 million and the Board of Governors of the Federal Reserve System (FRB) for approximately $98 million.

The Davis Polk team included partners Greg D. Andres and Mari Grace, counsel Fuad Rana and Gabriel Jaime-Bettan and associates Chautney M. Oluwole, Shiva Jayaraman, Stephanie R. Hansen, Alicia Hoke, Natalie Denby and Carolina Rabinowicz. Members of the Davis Polk team are based in the New York and Washington DC offices.