JP Morgan has been fined £33m by the Financial Services Authority – the largest-ever fine imposed by the regulator – for basic compliance failures which meant the bank had not protected client money by segregating it from its own funds over a seven-year period.

The regulator warned that it had several similar cases in the pipeline and called on the City to take notice of its compliance crackdown. It is understood that several blue-chip institutions have yet to respond to requests to provide assurances on fund segregation. "Firms need to raise their game as the FSA's focus on this area will continue to intensify," said Sally Dewar, the FSA's managing director of risk.

The JP Morgan fine comes as administrators to failed Wall Street bank Lehman Brothers find themselves dealing with a mountain of legal actions from large clients who claim the firm illegally commingled their money with the bank's own funds. The resulting chaos has been identified as one of the main reasons why the collapse of Lehman in September 2008 sent such powerful shockwaves through the financial system.

Ever since, regulators around the world have been pressing institutions once regarded as "too big to fail" to get their houses in order, particularly in separating client and bank resources.

The FSA's threat of draconian consequences over any failure to segregate client funds is part of chief executive Hector Sants's "be afraid" message set out in a speech a year ago: "There is a view that people are not frightened of the FSA. I can assure you that this is a view I am determined to correct. People should be very frightened of the FSA," he said in the speech.

The FSA has brought three successful criminal cases to date, including one against Malcolm "Streaky" Calvert, a former partner at UK brokerage Cazenove, who was jailed for 21 months in March. That conviction was closely followed by the arrests of seven insider dealing suspects, including a managing director at Deutsche Bank and the head of sales trading at Exane, part-owned by France's BNP Paribas.

The full story is available online.