J.P. Morgan Affiliates Settle SEC Enforcement Actions

Two affiliates of J.P. Morgan Chase & Co. — J.P. Morgan Securities (JPMS) and J.P. Morgan Investment Management (JPMIM) — agreed to pay $151 million in combined civil penalties and voluntary payments to investors to settle four enforcement actions brought by the Securities and Exchange Commission (SEC).

The affiliates did so without admitting or denying the findings in the SEC’s orders, the regulator said in a Friday (Nov. 1) press release.

The settlements came after the SEC charged the affiliates in five separate enforcement actions that alleged misleading disclosures to investors, breach of fiduciary duty, prohibited joint transactions and principal trades, and failures to make recommendations in the best interests of customers, according to the release.

The SEC did not impose a penalty in one of the actions taken against JPMS, citing JPMS’ cooperation in the investigation and its remedial measures, per the release.

“J.P. Morgan’s conduct across multiple business lines violated various laws designed to protect investors from the risks of self-dealing and conflicts of interest,” Sanjay Wadhwa, acting director of the SEC’s Division of Enforcement, said in the release. “With today’s settlements, which include multiple self-reports and large voluntary payments to harmed investors, J.P. Morgan is being held accountable for its regulatory failures.”

Reached by PYMNTS, a J.P. Morgan Chase spokesperson provided an emailed statement saying that the bank “strives to uphold the highest standards in client service around the world.”

“When issues are identified, we fix them and engage with our regulators to resolve any concerns,” the statement said. “We are pleased to have these matters resolved and remain dedicated to delivering an exceptional experience for our clients.”

The SEC’s order alleged that a JPMS disclosure to brokerage customers who invested in its Conduit private funds products did not reveal that a J.P. Morgan affiliate controlled the sale of shares; that JPMS failed to fully and fairly disclose the financial incentive it had when recommending its own Portfolio Management Program over other programs it offered; and that JPMS recommended products to its retail brokerage customers when less expensive ones offering the same investment portfolios were available, according to the release.

The order also alleged that JPMIM caused prohibited joint transactions that advantaged an affiliated foreign money market fund for which it served as the delegated portfolio manager, and that JPMIM engaged in or caused prohibited principal trades, per the release.

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