JPMorgan is developing a new employee surveillance program that will track whether traders are attending their compliance classes and how well they adhere to “personal trading rules” and risk limits, Bloomberg’s Hugh Son reports.
The idea is to monitor for employees who may go off the reservation and eventually predict behavioural patterns.
Spotting bad behaviour before it takes place is becoming a priority for the giant Wall Street firm, which has reportedly spent more than $US36 billion in fines and legal battles in the aftermath of the financial crisis.
The new program will roll out on the trading side first, and later in the investment banking and asset management departments.
JP Morgan has reportedly spent $US730 million and hired 2,500 more compliance workers to monitor behaviour. Other Wall Street banks have reportedly hired outside firms who are able to analyse emails, chat conversations, and phone calls for red flags.
Regulators are stepping up their efforts curb potentially dangerous risk-taking on Wall Street, from infiltrating boardroom meetings to forcing banks to spin off risky subsidiary businesses. But in this instance, it looks like JP Morgan is being proactive about employee behaviour.
A February company memo from COO Matt Zames reportedly reminded employees of the impacts of scandals and legal bills on everyone’s bonuses. And for executives, reducing legal bills is crucial in order to balance the books going forward.
Remember, legal fees were a major black mark on Wall Street earnings last quarter.