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Whale of a fine: where JPM’s bill ranks in the regulator's hall of shame
by Michelle Abrego on Sep 19, 2013 at 16:19
JP Morgan has taken a hefty hit from the FCA with a £137.6 million fine for failings related to the 'London Whale', but where did that get it on the regulator’s list of all time biggest fines? We've had a look in our archives and updated the list. Click through to find out….
UBS: £160 million
UBS holds the not-so-prestigious honour of receiving the largest ever fine from the UK regulator. In December 2012 the Financial Services Authority (FSA) fined UBS £160 million for its role in the Libor scandal.
At the time the fine tripled any previous penalty from the regulator and came less than a month after UBS was handed a £29.7 million fine for failing to prevent unauthorised trading by trader Kweku Abodoli that caused losses of £1.4 billion.
UBS was also fined £40m by the Swiss Financial Market Supervisory Authority and £740 million by two US regulators.
The FSA found that corrupt brokerage payments were made to reward brokers for their efforts to manipulate the Libor rate.
JP Morgan: £137.6 million
Only £22 million away from the largest UK financial fine, JP Morgan was hit with a £137.6 million penalty over its losses sustained by the ‘London Whale’ trades.
Overall, the firm was fined a total of £573 million by US and UK regulators, including a $200 million (£125.3 million) fine from the US Securities and Exchange Commission, $300 million (£188 million) from the Office of the Comptroller of the Currency, and $200 million (£125.3 million) from the Federal Reserve.
The regulator said the losses were caused by a weak management of a high risk trading strategy and an inadequate response to important information which should have notified the firm of the huge risks presented.
Royal Bank of Scotland: £87.5 million
The Royal Bank of Scotland (RBS) was slapped with a £87.5 million fine from the FSA in February over its Libor failings.
Like other banks fined over Libor it did not escape scrutiny from international regulators, taking on £390 million in fines in total.
The US Commodity Futures Trading Commission took $325 million (£207 million) and the US Department of Justice fined it $150 million (£95 million).
An investigation between many international regulators and justice departments uncovered wrongdoing on the part of 21 RBS employees, predominantly in relation to the setting of the bank's Yen and Swiss Franc Libor submissions.
Barclays: £59.5 million
Barclays swept to the top spot of the Financial Services Authority (FSA)’s biggest ever fines list when it coughed up £59.5 million for misconduct relating to the Libor and the Euribor. It has since been knocked of its perch by rival banks many of which were also caught up in the Libor scandal
To rub salt in wound the bank was also hit with two fines in the US: $200 million by the Commodities and Futures Trading Commission and $160 million by the US Department of Justice.
The Libor scandal would lead to then Barclays chief executive Bob Diamond and chairman Marcus Agius both stepping down. Tracey McDermott, director of enforcement and financial crime, said: ‘Barclays’ misconduct was serious, widespread and extended over a number of years.’
JPMorgan Securities: £33.3 million
JP Morgan is not stranger to fine or two. In June 2010 the Financial Services Authority (FSA) imposed a whopping £33.3 million on JP Morgan Securities for failing to protect client money.
The FSA fined the UK arm of the US investment bank for breaching its client money rules by failing to segregate $23 billion of client money from its futures and option business into ring-fenced accounts.
The penalty reflected the scale of the problem and the fact it had gone undetected for seven years, according to the FSA.
Prudential: £30 million
Prudential was fined £30 million over failings related to its aborted bid to buy Asian insurer AIA in March this year.
The fine related to failures to notify the regulator ahead of its ill-fated $35.5 billion (£23.4 billion) bid for Asian insurer AIA. The regulator only found out about the takeover plans when news of the bid leaked to the media in 2010.
To top off the fine, the FSA also censured Prudential chief executive Tidjane Thiam.
For its second entry into regulator’s hall of shame, UBS was fined £29.7 million for systems and controls failings that allowed rogue trader Kweku Adoboli to amass losses of $2.3 billion (£1.4 billion).
The FSA said the failings revealed 'serious weaknesses in the firm's procedures, management system and internal controls'. The fine was discounted from £42.4 million as a result of early settlement.
The FSA and Swiss financial regulator Finma had announced a joint probe shortly after UBS revealed the losses. Adoboli was jailed for seven years after he was found guilty of two counts of fraud.
Goldman Sachs International: £17.5 million
Goldman Sachs International was fined £17.5 million in September 2010 after failing to inform the FSA it was under investigation by the US Securities & Exchange Commission (SEC) over the now-infamous Abacus collateralised debt obligation (CDO).
Goldman Sachs failed to inform investors – including Royal Bank of Scotland, which lost an estimated £523 million – that hedge fund Paulson & Co had helped to select the loans in the CDO and was betting against the housing market.
The FSA fine pales into comparison with the $550 million penalty the SEC imposed in the US on Goldman Sachs for its ‘incomplete’ marketing of the package of sub-prime mortgages.
Shell: £17 million
At the time this was the third largest fine in the history of the FSA and it was surprisingly not levied on a financial services company but on oil company Shell.
Shell was fined £17 million in August 2004 for misleading investors for five years about the extent of its oil reserves. When the real figures were revealed, its share price dropped 7.5% and its market capitalisation fell £2.9 billion.
The FSA investigated several Shell employees who were instrumental in the market abuse, but dropped the case against them without taking action in November 2005.
Citigroup Markets: £13.9 million
The FSA fined Citigroup Global Markets £13.9 million in June 2005 for a trading strategy that disrupted the MTS fixed income trading platform. Citigroup bond traders made £9.9 million in less than an hour by selling the equivalent of an average day’s trading volume on the platform and then buying back when bond prices fell.
When applying the fine, Hector Sants, then managing director of wholesale business at the FSA, complained that Citigroup had executed a trading strategy without considering the risks and consequences for the marketplace.