Securities Regulation Daily Wrap Up, ENFORCEMENT—SEC censures JPMorgan for allowing disqualified person to trade SBS, (Oct 5, 2026)

By Anne Sherry, J.D.

JPMorgan was in the process of seeking the SEC’s permission to allow the statutorily disqualified person to effect swaps.

Two JPMorgan affiliates settled SEC charges connected with a disqualified person’s involvement in security-based swap transactions. According to the SEC’s order, the firms knew that the trader had been statutorily disqualified, but they didn’t have adequate systems or supervisory procedures to flag that he had started trading before the SEC allowed it. The cease-and-desist order censures the firm but imposes no monetary sanctions (In the Matter of J.P. Morgan Securities LLC and JPMorgan Chase Bank, N.A., Exchange Act Release No. 106569 (Oct. 2, 2026)).

In 2011, the U.K. Financial Services Authority fined the trader £65,000 for failing to recognize and report suspicious transactions, noting that his conduct was not deliberate or reckless and his integrity was not in question. The FSA’s finding amounted to a statutory disqualification under Exchange Act Section 3(a)(39)(F).

In 2015, when the respondent firms registered as swap dealers with the CFTC, they sought and obtained permission for the trader to act on the firms’ behalf. The SEC likewise has a process for requesting permission for a statutorily disqualified person to effect SBS transactions.

In 2021, the firms registered with the SEC as security-based swap dealers. Firm personnel told the trader and his supervisor that he could not effect SBS transactions until the firms got permission from the SEC. But there was no follow-up and no change to the disqualified person’s role supervising sales traders who sometimes executed SBS transactions with or for U.S. counterparties.

Between the end of 2021 and beginning of 2024, the trader personally effected 100 SBS transactions and supervised another 700. In March 2024, the SEC granted a Rule 194 order allowing him to trade. Shortly after that, JPMorgan discovered that he had already been doing so.

JPMorgan self-reported the violation to SEC staff. The firms also designed a system to detect violations of their policies and procedures against a disqualified person’s engaging in SBS activity. The SEC took the self-reporting and remediation into account when settling.

The resulting order censures the firms and orders them to cease and desist from future violations of Exchange Act Sections 15F(b)(6) and 15F(h) and Rule 15Fh-3(h)(1).

The case is Release No. 34-106569.

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