In a filing this week, the Financial Industry Regulatory Authority (FINRA) said it has censured J.P. Morgan Securities and imposed a $150,000 fine after finding deficiencies in its supervisory system for delivering preliminary prospectuses to institutional investors in initial public offerings (IPOs).
FINRA Fines J.P. Morgan Securities $150,000 Over IPO Prospectus Lapses
According to FINRA, between January 2018 and December 2021 the firm’s written supervisory procedures were not reasonably designed to ensure compliance with federal securities law requirements.
The regulator explained that under Rule 15c2-8(b) of the Securities Exchange Act of 1934, firms must provide customers expected to participate in an IPO with a preliminary prospectus at least 48 hours before sending a confirmation of sale.
FINRA said J.P. Morgan’s supervisory system did not adequately verify whether delivery had taken place.
For most of the roughly 400 IPOs distributed during the review period, there was no supervisory check on whether institutional clients received the required documents.
In some cases, it was stated that customers who had declined electronic delivery were not added to the mailing list for hard copies, contrary to the firm’s own procedures.
The regulator noted that J.P. Morgan identified some of the deficiencies in October 2021 and subsequently revised its procedures in December 2021 and again in January 2024.
Without admitting or denying the findings, J.P. Morgan consented to the sanctions, which include a censure and the $150,000 fine. The firm also waived any right to contest its ability to pay.
