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From Banking and Finance Law Daily, November 17, 2016

JPMorgan fined for hiring program; ordered to enhance management oversight

By John M. Pachkowski, J.D.

JPMorgan Chase & Co. has entered into a Cease and Desist Order with the Federal Reserve Board to resolve charges of unsafe and unsound practices related to the firm's practice of hiring individuals referred by foreign officials and other clients in order to obtain improper business advantages for the firm. The hiring practices by the firm’s Asia-Pacific investment bank—J.P. Morgan Securities (Asia Pacific) Limited—were known as the "Sons and Daughters program" and involved hiring the children of Chinese government officials as part of what was described, in a recent New York Times article, as "a quid pro quo to win business in the booming nation." The hiring program existed between 2008 and 2013 and netted $35 million in profits.

In issuing the Cease and Desist Order, the Fed found that the firm did not have adequate enterprise-wide controls to ensure that referred candidates were appropriately vetted and hired in accordance with applicable anti-bribery laws and firm policies.

Enhanced oversight and controls. Under the terms of the Cease and Desist Order, JPMorgan Chase is required to enhance the effectiveness of senior management oversight and controls relating to the firm's referral hiring practices and anti-bribery policies. The Fed is also requiring the firm to cooperate in its investigation of the individuals involved in the conduct underlying these enforcement actions and is prohibiting the organizations from re-employing or otherwise engaging individuals who were involved in unsafe and unsound conduct.

Monetary penalty. In addition, the Fed also assessed a $61.9 million civil money penalty for the unsafe and unsound practices.

The action taken by the Fed was done concurrently with the Justice Department and the Securities and Exchange Commission. The Justice Department fined JPMorgan Chase $72 million and SEC imposed a $130.5 million disgorgement order against JPMorgan Chase.

Companies: JPMorgan Chase & Co.; J.P. Morgan Securities (Asia Pacific) Limited

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