JP Morgan Securities has been slapped with a record £33.32 million fine from the City watchdog for failing to protect billions of dollars of client money over a six-and-a-half year period.
The FSA says the firm failed to put up to $23 billion of client money held by its futures and options business within a segregated account between 1 November 2002 and 8 July 2009.
The accidental breach occurred following the merger of JPMorgan and Chase. Instead of being held overnight in a segregated money market account, the client money was kept in an unsegregated account with JPMorgan Chase Bank.
During the seven year period in which the error went undetected, the amount of client cash varied between $1.9 billion in December 2002 and $23 billion in October 2008.
Under FSA rules, firms must keep client money separate from the firm's money in segregated accounts with trust status. Had JP Morgan Securities become insolvent at any time during this period, this client money would have been at risk of loss.
Margaret Cole, FSA director of enforcement and financial crime, said: "The penalty reflects the amount of client money involved in this breach.
"The FSA has repeatedly emphasised the importance of ensuring that client money is adequately protected. Despite being one of the largest holders of client money in the UK, JP Morgan Securities failed to do this. Firms need to sit up and take notice of this action - we have several more cases in the pipeline."
JP Morgan Securities qualified for a 30% discount for settling early. None of its clients suffered any losses as a result of the segregation error, nor was there any incorrect financial reporting for the period 2001-2008.