The Australian Securities and Investments Commission (ASIC) has accepted an enforceable undertaking from three J.P. Morgan foreign financial service providers for repeatedly failing to comply with disclosure requirements of ASIC’s exemptions.
The corporate regulator accepted EUs from J.P Morgan Securities (JPMSPLC), J.P. Morgan Securities (Asia Pacific) (JPMSAPL), and J.P. Morgan Securities (JPMSLLC), collectively known as J.P. Morgan entities.
The exemptions relieve J.P. Morgan from having to hold an Australian financial services licence (AFSL) under the Corporations Act.
“The number and duration of these failures demonstrated a systemic weakness in the compliance controls implemented by the J.P. Morgan entities,” the corporate regulator said.
Under the EU conditions:
The J.P. Morgan entities must appoint an ASIC-approved independent expert to review its compliance framework for the disclosure condition of the class order relief, report any shortcomings, and make recommendations on fixing them;
- They must design and apply a remediation action plan to fix the shortcomings stated in the independent expert’s report;
- The independent expert will then conduct a hindsight review of the entities’ compliance with the disclosure conditions one year after the implementation of the remedial action plan to assess its effectiveness; and
- The expert will report its findings to the entities, following which the entities must provide and apply a second remediation plan if the report makes such recommendations.
The entities reported the breaches of disclosure conditions to ASIC in 2014, which affected many wholesale clients over around six years. JPMSAPL reported a breach to ASIC in 2014, in which it estimated 55 whole clients were affected over a period of six years.
The breaches were also reported by the entities in 2008 and in 2005 for JPMSPLC.
ASIC commissioner, Cathie Armour, said: “Foreign financial service providers seeking to provide financial services to Australian wholesale clients must ensure that they have adequate and enduring measures in place to comply with all their obligations under the Australian regime.”
“The benefit of class order relief from licensing granted by ASIC will be subject to ongoing compliance with all the conditions set out in these instruments, including the disclosure condition.”
