J.P. Morgan knew one of its employees was legally disqualified from conducting certain security-based swap activity. It identified the problem internally. It told the employee and his supervisor that he could not conduct the restricted transactions. It began asking federal regulators for permission to let him do so anyway.
Then, for more than two years, the employee did precisely what he had been told he could not do.
According to an October 2 enforcement order from the Securities and Exchange Commission, the employee personally effected 100 security-based swap transactions involving U.S. counterparties and supervised traders who executed at least another 700 while J.P. Morgan was awaiting regulatory permission for his participation.
The bank’s compliance systems never caught it.
That would already constitute an awkward compliance failure for one of the world’s largest financial institutions. But an earlier SEC order reviewed by Bureaucracy Times makes the chronology considerably more uncomfortable.
While J.P. Morgan was seeking permission for the employee to participate in security-based swaps, the bank told the SEC that its compliance program included safeguards intended to protect against misconduct and errors by associated employees.
The SEC relied on those representations and granted permission.
Only afterward did J.P. Morgan discover that the employee had already been conducting and supervising the transactions.
The SEC has now found that J.P. Morgan Securities LLC and JPMorgan Chase Bank, N.A. willfully violated federal securities law and failed to establish and maintain an adequate supervisory system.
The punishment announced in the six-page order: a censure and an order to cease and desist.
No civil monetary penalty is identified.
A regulatory problem J.P. Morgan already knew about
The employee is not identified in the new enforcement order, which refers to him only as the “Associated Person.” But the SEC identified him publicly when it granted J.P. Morgan’s earlier application in March 2024.
He is Caspar Jonathan William Agnew, a longtime J.P. Morgan employee based in the United Kingdom.
Agnew’s regulatory problem dates to events in 2009.
According to a 2011 final notice issued by Britain’s Financial Services Authority, Agnew was working at JP Morgan Cazenove when a client sold millions of shares shortly before an unscheduled corporate announcement caused the share price to fall approximately 30 percent.
The regulator concluded that Agnew should have recognized reasonable grounds to suspect possible insider dealing or market abuse and should have reported the transactions internally so the bank could consider filing a Suspicious Transaction Report.
The FSA fined him £65,000.
There is an important distinction here. The British regulator did not find that Agnew participated in insider trading, nor did it accuse him of deliberately ignoring it. The FSA specifically found that his conduct was not deliberate or reckless and characterized the failure as an error of judgment.
Nevertheless, the regulatory finding had consequences in the United States. Under federal securities law, the foreign regulatory action subjected Agnew to what is known as a statutory disqualification.
That did not necessarily mean Agnew could never participate in regulated financial activity again. Regulators can grant relief allowing a disqualified person to work in particular capacities.
J.P. Morgan knew this terrain well.
In 2015, the National Futures Association granted relief allowing Agnew to associate with J.P. Morgan entities operating as registered swap dealers. J.P. Morgan later pointed to that decision when it sought similar permission from the SEC for the newer security-based swap regulatory regime, according to the SEC’s March 2024 order.
The important point is that Agnew’s regulatory status was not some forgotten personnel problem buried in an old filing cabinet.
J.P. Morgan had been actively managing it for years.
The bank found the problem. Then apparently stopped looking.
J.P. Morgan Securities and JPMorgan Chase Bank registered with the SEC as security-based swap dealers on October 29, 2021.
Before registration, J.P. Morgan required associated employees to complete questionnaires identifying potential statutory disqualifications.
Agnew disclosed his FSA action.
J.P. Morgan recognized that the action made him statutorily disqualified.
Company personnel then communicated to Agnew and his supervisor that he could not effect security-based swap transactions involving U.S. counterparties until J.P. Morgan obtained relief from the SEC.
So far, the compliance machinery appeared to work.
Then it stopped.
The SEC says J.P. Morgan personnel did not follow up with Agnew or his supervisor to confirm that they continued to understand and comply with the restriction. Agnew’s supervisory responsibilities also remained unchanged.
Between December 1, 2021 and January 8, 2024, Agnew personally effected 100 security-based swap transactions with or for U.S. counterparties.
Between November 5, 2021 and March 1, 2024, he also supervised sales traders who executed at least 700 such transactions.
And despite J.P. Morgan already knowing that Agnew was disqualified from performing that work without regulatory relief, the SEC says no company system or supervisory procedure alerted the bank to what was happening.
In other words, J.P. Morgan had successfully identified the employee, successfully identified the restriction and successfully communicated the restriction.
It apparently lacked a reliable mechanism for determining whether the restriction was actually being followed.
Meanwhile, J.P. Morgan was asking permission
The chronology becomes particularly striking in February 2022.
That month, J.P. Morgan personnel began the process with SEC staff of seeking permission under Rule 194 for Agnew to participate in security-based swap transactions despite his statutory disqualification.
The formal application did not arrive until February 2, 2024.
That application is not publicly available in full. The SEC’s 2024 order says the application and supporting materials are nonpublic, subject to the Freedom of Information Act. But the Commission’s public order describes several of J.P. Morgan’s arguments.
Among them was J.P. Morgan’s representation that its security-based swap dealer compliance program contained safeguards protecting against misconduct and errors by associated persons, including errors of the type underlying Agnew’s original British regulatory action.
The SEC said explicitly that it relied upon J.P. Morgan’s representations in determining that allowing Agnew to participate was consistent with the public interest.
On March 1, 2024, the Commission granted permission.
The problem, according to what the SEC now says, was that while J.P. Morgan was asking permission for Agnew to perform this work, he had already been performing it.
And J.P. Morgan apparently did not know.
The 2026 enforcement order adds another curious detail. J.P. Morgan’s February 2024 application said that if the application were approved, Agnew would then have authority to effect or participate in security-based swaps.
But the application, according to the SEC, did not include statements addressing whether Agnew had already effected or participated in such transactions while J.P. Morgan was operating as a registered security-based swap dealer.
That produces an extraordinary documentary contradiction.
In 2024, the SEC was told that J.P. Morgan’s compliance program contained safeguards designed to protect against misconduct and errors by associated persons.
In 2026, the SEC concluded that J.P. Morgan “did not establish or maintain a system that was reasonably designed to prevent and detect” security-based swap transactions conducted or supervised by a statutorily disqualified person.
Both statements now exist in the SEC’s own public record.
Permission granted. Problem discovered.
The SEC approved J.P. Morgan’s application on March 1, 2024.
Shortly thereafter, J.P. Morgan discovered that Agnew had already effected and supervised security-based swap transactions before receiving authorization.
On June 24, 2024, the bank self-reported the violations to SEC staff.
That self-reporting matters.
The SEC specifically says it considered J.P. Morgan’s decision to report the violations and the bank’s remedial actions when accepting the settlement. The order therefore should not be read as a finding that J.P. Morgan attempted to conceal the activity after discovering it.
What it does raise is a different question: how could the bank fail to discover the activity in the first place?
J.P. Morgan’s own written policies prohibited a statutorily disqualified person from engaging in the security-based swap activity without relief. The SEC’s findings suggest that the policy existed on paper without a sufficiently effective technical or supervisory mechanism behind it.
And the corrective measures are revealing.
According to the enforcement order, J.P. Morgan adopted new procedures in August 2026 requiring an established supervisory plan for individuals retained while Rule 194 relief is pending, system controls designed to detect whether those employees participate in swaps or security-based swaps, and monthly trade reviews.
Those measures sound remarkably similar to controls one might have expected to exist when J.P. Morgan already knew an employee was prohibited from performing particular transactions.
They apparently did not.
Willful violations, but no fine identified
The SEC ultimately found that J.P. Morgan Securities and JPMorgan Chase Bank willfully violated Section 15F(b)(6) of the Securities Exchange Act, which prohibits security-based swap dealers from allowing statutorily disqualified associated persons to participate in such transactions without applicable regulatory relief.
The Commission also found willful violations arising from J.P. Morgan’s failure to establish and maintain an adequate supervisory system.
“Willfully” has a particular legal meaning in this context and does not necessarily mean that J.P. Morgan intentionally set out to violate the law. The SEC’s order notes that the standard does not require proof that the actor knew the conduct violated securities law.
Still, the final sanction is notable.
The SEC censured J.P. Morgan Securities and JPMorgan Chase Bank and ordered them to cease and desist from committing future violations.
The order identifies no civil monetary penalty.
That does not establish that J.P. Morgan received unusually favorable treatment. The SEC expressly credited the bank’s self-reporting and remedial efforts, and cooperation can significantly affect enforcement outcomes.
But the contrast remains difficult to miss.
The employee’s underlying 2009 conduct, which the British regulator expressly found was neither deliberate nor reckless, resulted in a £65,000 individual penalty.
Years later, J.P. Morgan allowed that same employee, whose regulatory status it knew and had been actively managing, to personally conduct 100 restricted transactions and supervise at least 700 more while lacking systems capable of detecting the activity.
The SEC found willful violations.
The monetary penalty identified in the resulting order is zero.
The paperwork worked better than the controls
There is still an important piece of this story hidden from public view.
J.P. Morgan’s February 2024 Rule 194 application and its supporting materials are nonpublic, although the SEC’s approval order says they are subject to FOIA. The application could show precisely what J.P. Morgan told regulators about its safeguards, what supervisory mechanisms it described, and whether anything in the submission should have prompted questions about Agnew’s activities during the roughly two years the application process was underway.
Those records are worth pursuing.
But the public record already establishes the central problem.
J.P. Morgan knew Agnew was statutorily disqualified. Agnew disclosed the regulatory action himself. The bank recognized the restriction. It told him he could not participate in the transactions. It sought permission from the SEC to allow him to participate. And while doing so, J.P. Morgan represented that its security-based swap compliance program contained safeguards designed to protect against misconduct and errors by associated persons.
The SEC accepted those representations and granted the application.
Only then did J.P. Morgan discover that Agnew had already personally conducted 100 transactions and supervised at least 700 more.
Two years later, the SEC concluded that the bank never had a reasonably designed system capable of preventing and detecting the prohibited activity in the first place.
For a compliance regime built around knowing who is permitted to do what, J.P. Morgan appears to have successfully completed almost every administrative step.
It identified the employee.
It identified the rule.
It documented the restriction.
It notified the employee.
It notified his supervisor.
It contacted the regulator.
It filed the application.
It obtained the approval.
The one thing its system apparently could not do was determine whether the employee was already doing the thing all that paperwork said he could not do.
