7
Commission’s longstanding supervision regulation for futures and options, Regulation 166.3,
17 C.F.R. § 166.3 (2021).
Under Regulation 23.602, a violation is demonstrated by showing either that: (1) the
registrant’s supervisory system was generally inadequate; or (2) the registrant failed to perform
its supervisory duties diligently. See In re Commerzbank AG, CFTC No. 19-03, 2018 WL
5921385, at *10-11 (Nov. 8, 2018) (consent order) (noting textual similarities between
Regulation 23.602 and Regulation 166.3, applying case law concerning Regulation 166.3, and
citing In re Murlas Commodities, Inc., CFTC No. 85-29, 1995 WL 523563, at *9 (Sept. 1, 1995),
and In re Paragon Futures Assoc., CFTC No. 88-18, 1992 WL 74261, at *14 (Apr. 1, 1992)); In
re INTL FCStone Markets, LLC, CFTC No. 15-27, 2015 WL 4980321, at *3 (Aug. 19, 2015)
(consent order) (same). Evidence of violations that “‘should be detected by a diligent system of
supervision, either because of the nature of the violations or because the violations have occurred
repeatedly,’ is probative of a failure to supervise.” In re Société Générale Int'l Ltd., CFTC No.
19-38, 2009 WL 4915485, at *7 (Sept. 30, 2019) (consent order) (quoting In re INTL FCStone
Markets, 2015 WL 4980321, at *3).
JPMorgan Chase Bank, N.A., J.P. Morgan Securities LLC, and J.P. Morgan Securities
plc failed to supervise their swap dealer business activities diligently during the Relevant Period.
JPMorgan Chase Bank, N.A., J.P. Morgan Securities LLC, and J.P. Morgan Securities plc failed
to maintain an adequate supervisory system to ensure that employees did not utilize non-
approved methods to engage in communications relating to firm business, including the swap
dealer business. JPMorgan Chase Bank, N.A., J.P. Morgan Securities LLC, and J.P. Morgan
Securities plc’s failure to supervise is demonstrated by their failure to detect, prevent, and
remediate repeated violations of the Commission’s recordkeeping requirements and firm policies
and procedures. Supervisory personnel failed to ensure that employees complied with the
Commission’s recordkeeping requirements and firm communications policies and in some
instances themselves violated the policies. These supervision failures also resulted in the failure
to keep and maintain Commission-required records, the failure to maintain the records in such a
manner as to make them readily available, and the failure to produce the records promptly upon
request. By this conduct, JPMorgan Chase Bank, N.A., J.P. Morgan Securities LLC, and J.P.
Morgan Securities plc failed to supervise diligently their officers, employees, and agents, in
violation of Section 4s(h)(1)(B) of the Act and Regulation 23.602(a).
E. J.P. Morgan Securities LLC’s Failure to Diligently Supervise in Violation of
Regulation 166.3
Regulation 166.3 states:
Each Commission registrant, except an associated person who has no supervisory
duties, must diligently supervise the handling by its partners, officers, employees
and agents (or persons occupying a similar status or performing a similar
function) of all commodity interest accounts carried, operated, advised or
introduced by the registrant and all other activities of its partners, officers,
employees and agents (or persons occupying a similar status or performing a
similar function) relating to its business as a Commission registrant.