JPMorgan will now pay the SEC $151 million in violations to settle a series of enforcement cases, including defrauding its investors.
JPMorgan Chase is set to pay $151 million to settle five cases brought by the Securities and Exchange Commission (SEC) related to various allegations, including violations of rules meant to protect investors.
This settlement comes on the heels of previous issues the bank faced regarding conflicts of interest when recommending its own investment funds.
Of the $151 million, $90 million will go to reimburse customers who were harmed, while $61 million will be paid in fines.
Notably, JPMorgan did not admit to any wrongdoing in these cases.
Sanjay Wadhwa, the acting director of the SEC’s enforcement division, stated that JPMorgan’s actions violated laws intended to protect investors from conflicts of interest.
He emphasized that the bank is being held accountable for its failures.
One major issue involved misleading information given to customers who invested in “Conduit” funds, which pooled money to invest in private equity or hedge funds.
Contrary to what they were told, a JPMorgan affiliate controlled the trading of these funds, exposing investors to more risks and delays when selling shares.
JPMorgan Securities, the bank’s retail brokerage, will pay $90 million to reimburse about 1,500 Conduit fund investors and an additional $10 million penalty.
In another case, from July 2017 to October 2022, JPMorgan failed to properly disclose how its financial advisors were incentivized to recommend an in-house Portfolio Management Program over third-party options.
The bank and its advisors could earn more from this program because they didn’t have to share fees with outside managers, allowing them to charge clients more while still advertising a lower fee compared to third-party services.
The assets in this program grew significantly, from $10.5 billion to more than $30 billion over seven years.
JPMorgan agreed to a $45 million penalty for this issue.
The SEC also found that between June 2020 and July 2022, JPMorgan Securities recommended its own Clone Mutual Funds to retail customers despite the availability of cheaper exchange-traded funds.
Around 10,500 customers purchased these funds during that period.
JPMorgan Securities has agreed to stop these practices and has already repaid customers $15.2 million without incurring additional fines.
In a separate case involving JPMorgan Investment Management, the bank caused issues with $4.3 billion in prohibited transactions, where a foreign money market fund managed three U.S. funds.
JPMorgan agreed to a $5 million penalty and a cease-and-desist order.
Lastly, between July 2019 and March 2021, JPMorgan Investment Management engaged in 65 prohibited trades worth $8.2 billion.
This involved using an outside broker to buy securities, which were then purchased for its clients, leading to a $1 million fine.
A spokesperson for JPMorgan expressed satisfaction in resolving these complaints and affirmed the bank’s commitment to maintaining high standards in client service.
They stated that when problems are identified, the bank takes steps to fix them and works with regulators to address any issues.
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