The order to suspend any new real estate business begins next Thursday, April 13. As part of the suspension, the bank must produce a plan for improving internal controls and establishing proper governance and compliance systems by May 8. In a statement, JP Morgan Trust accepted the findings and said it will "make every effort" to enhance its internal controls "to avoid any repeat of the incidents."

The FSA found multiple violations were committed by the JP Morgan Trust unit that deals with real estate securitization. The violations include using trust assets as conduits for tax-avoidance schemes, failing to meet personal identification verification requirements and engaging in sales that gave rise to conflicts of interest.

"The Bank does not appoint executives or employees with sufficient experience and knowledge of trust business to take charge of legal affairs and compliance," according to the FSA's findings. "Instead, operations are carried out by executives and employees with no practical experience in real estate business."

Also this week, the FSA penalized JP Morgan Chase Bank Tokyo for failing to improve its business practices as previously required. Last week, the FSA ordered the bank's asset management arm to improve its operations. That order was prompted by a dealer who mistakenly shifted proprietary trading losses on to a customer's account.

Last month, the FSA imposed punitive measures against the Tokyo branch of JP Morgan Securities. The unit is alleged to have manipulated prices in Topix futures trades and to have failed to sufficiently disclose to buyers information about the underlying real estate assets of a corporate bond in a finance transaction.

Instant Insights /

Japan Regulator Punishes JP Morgan for Questionable Real-Estate Dealing

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