The Monetary Authority of Singapore has imposed a penalty on JPMorgan Chase for misconduct by its relationship managers in OTC bond transactions. Credit: TK Kurikawa/Shutterstock.

The Monetary Authority of Singapore (MAS) has levied a civil penalty of S$2.4m ($1.78m) on JPMorgan Chase Bank (JPM) for failing to identify the misconduct of its relationship managers (RMs) in over-the-counter (OTC) bond transactions.

The RMs made inaccurate or incomplete disclosures to clients, leading to overcharges in spreads above the bilaterally agreed rates. The transactions in question occurred between November 2018 and September 2019.

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This enforcement action follows MAS’ scrutiny of pricing and disclosure practices within the private banking industry.

JPMorgan Chase’s RMs were found to have charged clients spreads over the interbank prices, which were not transparent to the clients.

The lack of adequate processes and controls at JPMorgan Chase Bank failed to ensure adherence to pre-agreed spreads, resulting in misrepresentation and omission of material information.

MAS’ investigation into JPMorgan Chase’s OTC bond transactions revealed that in 24 instances, RMs either misrepresented price components or failed to disclose that the charged spreads were higher than agreed, violating sections 201(c) and 201(d) of the Securities and Futures Act (SFA).

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JPMorgan Chase has acknowledged its liability under section 236C of the SFA and has compensated the affected clients for the overcharged fees.

Furthermore, JPMorgan Chase has taken steps to enhance its pricing frameworks and internal controls to prevent similar issues in the future.

MAS is conducting separate reviews into the RMs involved in the misconduct. A civil penalty action, such as this, is not a criminal proceeding and does not carry criminal penalties.

The civil penalty regime is intended to work alongside criminal sanctions to address market misconduct effectively.

Under the SFA, MAS has the authority to agree with any entity to a civil penalty for contraventions of Part 12 of the SFA.

The penalty can be up to three times the profit gained or loss avoided from the contravention, with a minimum penalty of $50,000 for individuals and $100,000 for corporations.

In April this year, JPMorgan Chase opened its new Glasgow office, uniting staff in a modern facility after outgrowing its previous site.