Securities: UK's FSA fines JP Morgan Securities in largest UK fine to date.

The UK's Financial Services Authority has fined JP Morgan Securities GBP33.32 million in the largest fine yet levied by the UK regulator.

There will be some who think it is not enough.

JPMSL's offence is startling, the sort of thing that gets UK lawyers kicked out of the profession. It commingled client and own funds - and did so for seven years.

Under the FSA’s client money rules, firms are required to keep client money separate from the firm's money in segregated accounts with trust status. This helps to protect client money in the event of the firm's insolvency.

The FSA says "Between 1 November 2002 and 8 July 2009, JPMSL failed to segregate the client money held by its futures and options business (F&O) with JPMorgan Chase Bank N.A (JPMCB). The error occurred following the merger of JPMorgan and Chase. Instead of being held overnight in a segregated money market account, JPMSL’s F&O client money was held in an unsegregated account with JPMCB. This error remained undetected for nearly seven years.

"During this period, the client money balance held by the F&O business of JPMSL varied between USD1,900 million (in December 2002) and USD23,000 million (in October 2008). Had the firm become insolvent at any time during this period, this client money would have been at risk of loss."

It went on "The FSA has repeatedly emphasised the importance of ensuring that client money is adequately protected. Despite being one of the largest holders of client money in the UK, JPMSL failed to do so."

In working out the level of the penalty the FSA took into account that the misconduct was not deliberate and that the firm self-reported on discovering the issue – it also immediately remedied the situation. No clients of JPMSL suffered any losses as a consequence of the segregation error, nor was there any incorrect financial reporting by JPMSL for the period 2001-2008. The size of the penalty is equivalent to 1% of the average amount of unsegregated client money held by JPMSL with JPMCB. Without the settlement discount the fine would have been £47.6 million.