Today, U.S. securities and futures regulators announced that JPMorgan Securities LLC and JP Morgan Chase Bank have agreed to pay $307 million to settle charges by the Securities & Exchange Commission (SEC), as well as other regulators, that the bank failed to disclose it was steering advisory clients to proprietary products, including the firm's own proprietary mutual funds, to obtain higher fees.
The investment advisory business and the nationally chartered bank will pay $267 million in disgorgement and civil penalties to the SEC. Meanwhile, the banking arm, JP Morgan Chase, will pay an additional $40 million in penalties to the Commodities Futures Trading Commission (CFTC) in order to resolve investigations into claims the bank ailed to disclose conflicts related to its use of proprietary products, such as JPMorgan mutual funds that allowed the bank to collect higher fees. A JP Morgan spokesperson said the financial giant has improved it disclosure process over the past couple of years and that prior non-disclosure was unintentional.
JPMorgan Chase Bank also failed to disclose a preference for proprietary funds to its affluent, high net worth and ultra-high net worth clients of JPMorgan Private Bank and Chase Private Client from 2011 to 2014, according to the SEC order. To settle the charges, JPMorgan Securities and JPMorgan Chase Bank agreed to jointly disgorge $127.5 million, plus $11.8 million in interest. They also agreed to a $127.5 million penalty to the SEC in a settlement that included the acknowledgment the company violated federal securities laws.
JPMorgan Chase Bank also agreed to pay $40 million to settle CFTC charges that it didn’t inform clients that it was investing funds in investment management accounts and Global Access Portfolios with a preference for proprietary funds. The bank also agreed to pay $60 million in disgorgement, which will be offset completely by the disgorgement paid to the SEC.
JPMorgan first disclosed the investigation in a Form 10-Q filed with the SEC this past May and that the bank was was cooperating with the investigations. Last month, the bank disclosed that it was engaged in discussions to resolve the investigations with the SEC and the CFTC.
The experienced securities litigation attorneys at Colling Gilbert Wright & Carter have litigated and resolved hundreds of FINRA arbitration claims, many involving mortgaged backed securities. If you believe you lost money due to negligence or fraud on the part of your FINRA registered broker dealer, please contact us for a free case evaluation.