"Even if it's an oversight, the fact that it's such a large amount and it went on for seven years makes me scared stiff." Prof. Tamar Frankel, an authority on Fiduciary Law, quoted by Julia Werdigier, "JPMorgan Penalized By Regulator In Britain" p. B3, col. 6 (New York Times Nat'l ed., "Business Day" Section, Friday, June 4, 2010).
The United Kingdom requires futures and options securities dealers to keep client funds in separate accounts, protected from payments they make from their operating accounts. Parenthetically, this requirement sounds like a lawyer's trust account requirement and like the requirement to keep proprietary trading separate from the investment of client funds that is under consideration along with other financial reform proposals in the United States.
"J.P. Morgan failed to separate client funds worth $1.9 billion to $23 billion from 2002 until July 2009," according to the United Kingdom's Financial Services Authority. Julia Werdigier, JPMorgan Penalized, New York Times, supra. The Financial Services Authority levied penalties of $48.6 million on JP Morgan, a record penalty amount. Id.
The new Prime Minister, leader of Britain's Conservative Party, has targeted the F.S.A. for partial dismemberment, it is reported, which is better perhaps than totally barring the F.S.A. from penalizing financial failures to keep bank money segregated from client trust funds.
The author drew on the landmark work of Professor Frankel in Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" ยงยง 3:26 - 3:29 (Shepard's/McGraw-Hill First Edition; West Publishing Co. Second Edition and 2010 Supplement in process).
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