NYSE Regulation Fines J.P. Morgan Securities $2.1 million

New York Stock Exchange Regulation announced today that it has taken a disciplinary action against J.P. Morgan Securities, Inc. of New York City, a member firm, for failing to preserve electronic mail communications (including inter-office memoranda and communications) received and sent by its employees that related to its business, as well as supervisory failures.   This matter arises out of the research analyst conflict of interest case. 

An NYSE hearing panel found that, between July 1, 1999 and June 30, 2002, the firm failed to ensure compliance with certain NYSE rules and federal securities laws.  The firm consented without admitting or denying guilt. 

• In addition, the hearing panel found the firm lacked adequate systems or procedures for the preservation of electronic mail communications.
  
• NYSE Regulation, the U.S. Securities and Exchange Commission and NASD Inc. discovered these deficiencies during a joint inquiry into the supervision of the firm’s research and investment banking activities.

“J.P. Morgan Securities’s representation that its email production was complete, without disclosing that it had failed to retain, locate and restore all email responsive to our investigation, is simply unacceptable,” said Susan L. Merrill, chief of enforcement, NYSE Regulation. 

The NYSE imposed a penalty of a censure, $2.1 million fine, and a requirement that the firm review its procedures regarding the preservation of electronic communications for compliance with Exchange rules and the federal securities laws.  J.P. Morgan Securities consented to the penalty.  The amount paid to the Exchange by the firm was reduced by $700,000 pursuant to a civil monetary penalty paid to the U.S. Treasury and by $700,000 pursuant to a fine paid to the NASD, in related proceedings.