Internal Control Failure by J.P. Morgan Securities
The Financial Supervisory Service (FSS) recently told the Seoul branch of J.P. Morgan Securities to strengthen its internal control with regard to inter-subsidiary relations.
According to the FSS, J.P. Morgan Securities Seoul involved in transaction size and price determination, beyond customer introduction, during J.P. Morgan Chase Bank’s structured deposit marketing. “In addition, J.P. Morgan left no records as to bond marketing managers’ meetings and did not inspect messenger chats during its meeting and communication record inspection and the inspection stopped at checking five-day emails of just one staff member in each department,” the FSS explained.
The FSS also called for J.P. Morgan to improve its monitoring in relation to trading of research objects. The FSS said that trading without evidence documents and clear reasons occurred in its subsidiaries between 2016 and May last year.
These days, the moral hazard of foreign securities companies involved in naked short selling, scalping, and the like is coming under increasing criticism. According to Democratic Party lawmaker Kim Byung-wook, a total of 101 securities companies, including 94 foreign, were sanctioned for naked short selling in South Korea during the past 10 years.