Two JPMorgan wealth management subsidiaries have agreed to pay $267 million to the US Securities and Exchange Commission (SEC) to settle charges that they failed to disclose conflicts of interest to clients.
In a parallel action, JPMorgan Chase Bank agreed to pay a $40m penalty to the CFTC.
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America’s largest bank by assets admitted that it failed to inform clients about ‘numerous conflicts of interest’ while managing their money during 2008-13.
The SEC in its probe found that the firm’s investment advisory business JP Morgan Securities (JPMS) and nationally chartered bank JPMorgan Chase Bank N.A. (JPMCB) preferred to invest clients in the firm’s own proprietary investment products without properly disclosing this preference.
"This preference impacted two fundamental aspects of money management – asset allocation and the selection of fund managers – and deprived JPMorgan’s clients of information they needed to make fully informed investment decisions," the SEC said in a statement.
The SEC added that JPMCB failed to disclose several conflicts of interest to certain high net worth (HNW) and ultra-high net worth (UHNW) clients of JPMorgan’s U.S. Private Bank and certain clients of Chase Private Client, who invested in JP Morgan Investment Portfolio, a discretionary managed account program available to affluent Chase Bank clients.
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By GlobalDataSEC enforcement division director Andrew Ceresney said: "Firms have an obligation to communicate all conflicts so a client can fairly judge the investment advice they are receiving. These JPMorgan subsidiaries failed to disclose that they preferred to invest client money in firm-managed mutual funds and hedge funds, and clients were denied all the facts to determine why investment decisions were being made by their investment advisers."
