JPMorgan Chase & Co. (NYSE:JPM) has sent two of its traders packing after they failed to follow some of the bank’s compliance procedures.
Sources familiar with the matter claim that there were disagreements with the valuation of various trades. The two traders who were removed from their positions are Chi Lee, who was a junior treasury leader and Andrew Lombara who was the head of US Treasury, trading at Chase. The bank did not reveal the reason the two left the bank in January, and it has remained that way until now.
According to a report by FT, the two failed to follow measures that were set up to value the reserves that support treasury products known as Strips. The two traders wanted to grow the size of the reserve, and they did not notify the reserve committee when doing so. According to JP Morgan, this move was in violation of the bank’s internal procedures and policies.
The bank wrote in a filing in January that the employees failed to stick to various control processes. The filing was forwarded to the Financial Industry Regulatory Authority (Finra) on January 8. Finra then reported to the Financial Times that investigations around the dismissal of the two traders were ongoing at the time. The firing incident also came at a time when the bank was under a lot of pressure on its fixed-income trading businesses that were suffering from strict regulation and the migration to electronic platforms. The bank’s clients also doubted the risk aversion by the firm.
Despite the challenges, JP Morgan has overcome most of the challenges and emerged as the market leader in various categories. Unfortunately, its commodities, currencies and revenues from trading debt have been affected and have declined over the last five years. Strips allow investors to trade using the interest payments on the Treasury securities. The interest payments can be traded separately from the principal amount. None of the two employees who were stripped of their jobs have responded to inquiries about the circumstances of the termination of their jobs.
