- JPMorgan Chase is facing a potential fine connected to "historical deficiencies in internal controls and internal audit" in wealth management and other areas, the bank said Monday in a 10-Q filing with the Securities and Exchange Commission (SEC).
- The bank said in the filing it already has controls in place to address the flaws found by a regulator, which JPMorgan did not identify — although the affected subsidiary is primarily regulated by the Office of the Comptroller of the Currency (OCC).
- The disclosure comes little more than a month after JPMorgan Chase agreed to pay the Justice Department, the SEC and the Commodity Futures Trading Commission $920.2 million to settle allegations the bank manipulated the precious metals and Treasury markets over eight years. The penalty marked a record high for a bank caught spoofing.
Monday's filing comes amid a surge of settlements some banks may be looking to cement before the election is decided, in case a Biden administration yields stiffer regulation and penalties.
"There are a handful of financial institutions in my view that may try to settle with an outgoing Trump administration rather than face what could be a more aggressive Biden enforcement regime," Elliott Stein, an analyst at Bloomberg Intelligence, told the wire service. "If Trump wins, I think ongoing cases continue apace."
In the past month, Goldman Sachs resolved its decade-long 1MDB bribery scandal, agreeing to pay $2.9 billion to the Justice Department and regulators in the U.K., Singapore and Hong Kong, and clawing back $174 million in compensation from current and former executives. Scotiabank agreed in August to pay $127.4 million to resolve its own spoofing charges. And TD settled with the Consumer Financial Protection Bureau (CFPB) over "deceptive" overdraft enrollment practices in an agreement that will cost the Toronto-based lender $97 million in restitution and a $25 million fine.
The OCC has cited internal controls as a focus of at least one recent nine-figure penalty. The regulator fined Citi $400 million last month over persistent issues in risk management, data governance and internal controls, and reserved the right to require the bank to make changes to senior management and board if the regulator deems it is moving too slowly.
JPMorgan is in talks with the unnamed regulator to resolve its deficiencies — a matter on which the bank wouldn't comment to American Banker, The Wall Street Journal or CNBC beyond referring to the filing. The OCC also declined to comment.
The bank's warning of a fine, however, may be a signal that some aspects of a settlement still need to be ironed out.
"Sometimes we see these additional penalties when it takes a long time to resolve or is not resolved in a way the regulators would like," Brian Kleinhanzl, an analyst with Keefe, Bruyette & Woods, told American Banker.
But banks may find regulators go easier on institutions that are stricter with themselves when a deficiency is found.
"Egregious cases result in stiff fines no matter which administration, but the more banks can do on their own to administer punishments, like with clawbacks, the more leniency they may get from the government," Stein told Bloomberg.