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On Friday it was reported that the Financial Industry Regulatory Authority (FINRA) fined J.P. Morgan (JPM, Financial) Securities $3 million for reporting inaccuracies in systemwide reporting and supervisory oversights dating back more than 16 years.
FINRA revealed that the firm misreported about 820,000 positions short of approximately 77 billion shares between June 2008 and August 2024. The differences were due to operational errors, including the lapsing of positions from U.S. affiliates, mishandling of stock loan activities, and failure to show certain positions in Canadian and Latin American securities.
Furthermore, FINRA said the firm violated its FINRA Rules 4560 and 2010 and corresponding NASD regulations by failing to establish effective supervisory systems to ensure compliance. Supervisory oversights and poor safeguards to detect errors in short-interest data reporting exacerbated the problem.
J.P. Morgan Securities had since put in place enhanced policies and periodic reviews to resolve these deficiencies, the regulator said. The firm accepted the sanctions and waived its right to challenge the finding but without admitting or denying the allegations.
This is the latest fine amid FINRA's ongoing focus on the reporting of short interest. This also helps other financial institutions learn from their mistakes and serves as a lesson that a strong compliance framework plays a much-needed role in combating regulatory risk.
