ASIC has accepted an enforceable undertaking (EU) from JP Morgan Securities plc, JP Morgan Securities (Asia Pacific) and JP Morgan Securities LLC.
The EU was accepted by ASIC following concerns about significant and repeated failures to comply with the disclosure conditions of ASIC exemptions relied upon by the JP Morgan entities, said the regulator.
“The ASIC exemptions provide relief to the JP Morgan entities from the requirement to hold an Australian financial services licence (AFSL) under the Corporations Act,” said ASIC.
“The number and duration of these failures demonstrated a systemic weakness in the compliance controls implemented by the JP Morgan entities.”
The ASIC licensing exemptions required the JP Morgan entities to provide written disclosure to all persons to whom financial services are provided that they are exempt from the requirement to hold an AFSL, and they are authorised and regulated by relevant foreign regulatory authorities under foreign laws.
Under the terms of the EU:
The JP Morgan entities must an appoint an ASIC approved independent expert to review its compliance framework implemented for the disclosure condition of the relevant class order relief, report any deficiencies and make recommendations on how to rectify those deficiencies to ensure compliance with disclosure conditions.
- The JP Morgan entities must an appoint an ASIC-approved independent expert to review its compliance framework implemented for the disclosure condition of the relevant class order relief, report any deficiencies and make recommendations on how to rectify those deficiencies to ensure compliance with disclosure conditions.
- The JP Morgan entities must provide and implement a remediation action plan to address any deficiencies and recommendations from the independent expert’s report.
- The independent expert will assess and test the remedial actions implemented by the JP Morgan entities by conducting a hindsight review of the JP Morgan entities’ compliance with the disclosure conditions one year after the implementation of the remedial action plan.
- Following the hindsight review, the independent expert will report to the JP Morgan entities, following which the JP Morgan entities must provide and implement a second remediation plan if the independent expert report makes recommendations to do so.
ASIC commissioner Cathie Armour said: “It is fundamental to the class order relief granted to foreign financial service providers to disclose to clients that they are exempt from holding an Australian financial services licence and that they are regulated by the relevant overseas regulatory authority.
“Foreign financial service providers seeking to provide financial services to Australian wholesale clients must ensure that they have adequate and enduring measures in place to comply with all their obligations under the Australian regime.
“The benefit of class order relief from licensing granted by ASIC will be subject to ongoing compliance with all the conditions set out in these instruments, including the disclosure condition,” she said.
