On November 21, 2017, the Financial Industry Regulatory Agency (“FINRA”) fined J.P. Morgan Securities, LLC, $1.25 million for HR due diligence failures from 2009 until May of this year. Pursuant to federal securities laws, broker-dealers must fingerprint certain non-registered associated persons to help determine if any of them have been convicted of a disqualifying criminal offense. According to FINRA, J.P. Morgan did not “conduct timely or adequate background checks on approximately 8,600, or 95 percent, of its non-registered associated persons.”
Over the last few years, there has been a “Ban the Box” legislative movement designed to provide greater employment opportunities to job applicants with criminal histories. As background, “Ban the Box” laws usually require employers to delay inquiries into an employee’s criminal history until later in the hiring process, and not have a “box” on the employment application. These criminal inquiries would then be made after a conditional offer of employment has already been extended based on the prospective employee’s qualifications, and then the prospective employee would be given a chance to explain any criminal history.
The “Ban the Box” movement has spread nationwide, with 27 states having some sort of policy which regulates the use of criminal history in state-employment applications, and with some localities extending such policies to government contractors and even private employers. Although the motives behind the “Ban the Box” movement may be noble, “Ban the Box” may not always be the safest policy. As is made clear by the significant fine that FINRA administered to J.P. Morgan, employers must ensure that they are aware of applicable laws in their industry with respect to the required HR due diligence. In the financial services industry particularly, employers must not delay too long in performing adequate checks, or worse yet, fail to do them at all.
While many convicted felons are rehabilitated and can be valuable employees, others do pose real risks. Employers owe it to themselves and all their employees and stakeholders to make decisions based upon the most accurate and complete information available.
More information on FINRA’s fine of J.P. Morgan can be found at: http://www.finra.org/newsroom/2017/finra-fines-jp-morgan-125-million-failing-screen-its-employees.