Affiliates of JP Morgan have agreed to Pay $151m to resolve the US Securities and Exchange Commission’s (SEC) enforcement actions.
The SEC has brought five enforcement actions against JP Morgan Securities (JPMS) and JP Morgan Investment Management (JPMIM), both affiliates of JPMorgan Chase & Co.
The charges include misleading investor disclosures, breaches of fiduciary duty, unauthorised joint transactions and principal trades, as well as failing to provide recommendations that align with the best interests of customers.
Without admitting or denying the SEC’s findings, over $151m in combined civil penalties and voluntary payments to investors were agreed upon by the two affiliates to resolve four enforcement actions. No penalty was imposed in one action against JPMS, as the firm cooperated with the investigation and took remedial measures.
Sanjay Wadhwa, Acting Director of the SEC’s Division of Enforcement, stated: “JP Morgan’s conduct across multiple business lines violated various laws designed to protect investors from the risks of self-dealing and conflicts of interest.
“With today’s settlements, which include multiple self-reports and large voluntary payments to harmed investors, JP Morgan is being held accountable for its regulatory failures.”
The five actions were:
- Conduit Private Funds: JPMS misled investors about the management of its Conduit private funds. It will pay $90m to affected investors and a $10m civil penalty.
- Portfolio Management Program: JPMS failed to disclose financial incentives in recommending its own program over third-party options, leading to a $45m penalty.
- Clone Mutual Funds: JPMS recommended Clone Mutual Funds over cheaper ETFs, impacting about 10,500 customers. While it violated Regulation Best Interest, no penalty was imposed due to its self-reporting and $15.2m repayment to customers.
- Joint Transactions: JPMIM facilitated $4.3bn in prohibited joint transactions that favoured an affiliated fund, resulting in a $5m civil penalty.
- Principal Trades: JPMIM conducted 65 prohibited trades worth $8.2bn, violating conflict-of-interest rules. It faces a $1m penalty for these actions.
The firm has found itself on the wrong end of several investigations this year. In August, JP Morgan Chase was hit with a lawsuit from a customer from Illinois over alleged “unreasonably” low interest rates shortchanging him on its cash sweep programme.
