JPMorgan Settles with US Regulators for $367 million Over Conflicts of Interest
- The U.S. bank has agreed to pay for violating the requirement to disclose conflicts of interest to some of its private banking clients.
The U.S. Securities and Exchange Commission (SEC) has announced in tandem with the U.S. Commodity Futures Trading Commission (CFTC) that two wealth management subsidiaries of JPMorgan Chase have agreed to pay a total settlement of $367 million. The settlement is related to charges over the bank's failure to disclose to some of its private banking clients the conflicts of interest that existed on certain securities.
The bank admitted to the wrongdoing and agreed to pay $267 million to settle charges with the SEC and an additional $100 million to the CFTC. The CFTC order requires JPMorgan and its subsidiaries to pay a $40 million civil monetary penalty as well as $60 million in disgorgement. The bank is also required to cease and desist from further violations as charged.
The issue has been raised numerous times in the past, with the most notable example being linked to the financial crisis. A number of investors have been questioning the "client's best interest" practice of several major banks, that have sold them debt securities bundled with toxic mortgage subprime loans.
JPMorgan Securities breached its fiduciary duty to certain clients
In this case, JPMorgan Chase and its subsidiaries have been directing clients to invest in the company's proprietary products without disclosing this preference. The clients of the New York headquartered bank have been misinformed by being deprived of information that could have impacted their decisions.
Commenting on the matter, the Director of SEC's enforcement division, Andrew Ceresney, said: “Firms have an obligation to communicate all conflicts so a client can fairly judge the investment advice they are receiving.”
Transparency has been a serious issue in the investment products market in recent years. High net worth and ultra-high net worth clients have not remained unscathed from the actions of JPMorgan's companies.
“These J.P. Morgan subsidiaries failed to disclose that they preferred to invest Client Money Client Money Client money refers to the money or margin – which may be any currency in the form of cash, check, draft, or electronic transfer – that a firm receives or holds for a client. Money held by a firm in the form of a stakeholder, which is are not payable on demand or immediately due, also refers to client money. The definition of client money does not apply to money held by businesses that operate in its own name on behalf of a client. Although the client does have to be in agreement before this arr Client money refers to the money or margin – which may be any currency in the form of cash, check, draft, or electronic transfer – that a firm receives or holds for a client. Money held by a firm in the form of a stakeholder, which is are not payable on demand or immediately due, also refers to client money. The definition of client money does not apply to money held by businesses that operate in its own name on behalf of a client. Although the client does have to be in agreement before this arr Read this Term 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,” Mr Ceresney explained.
Adding to the details, the Co-Chief of the SEC's enforcement division, Julie Riewe clarified: "In addition to proprietary product conflicts, JPMorgan Securities breached its fiduciary duty to certain clients when it did not inform them that they were being invested in a more expensive share class of proprietary mutual funds, and JPMorgan Chase Bank did not disclose that it preferred third-party-managed hedge funds that made Payments Payments One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl Read this Term to a JPMorgan affiliate."
The wrongdoings by the bank are likely to lead to further legal action from its clients, since the company has admitted to the wrongdoing in its settlement with the SEC and CFTC.
The U.S. Securities and Exchange Commission (SEC) has announced in tandem with the U.S. Commodity Futures Trading Commission (CFTC) that two wealth management subsidiaries of JPMorgan Chase have agreed to pay a total settlement of $367 million. The settlement is related to charges over the bank's failure to disclose to some of its private banking clients the conflicts of interest that existed on certain securities.
The bank admitted to the wrongdoing and agreed to pay $267 million to settle charges with the SEC and an additional $100 million to the CFTC. The CFTC order requires JPMorgan and its subsidiaries to pay a $40 million civil monetary penalty as well as $60 million in disgorgement. The bank is also required to cease and desist from further violations as charged.
The issue has been raised numerous times in the past, with the most notable example being linked to the financial crisis. A number of investors have been questioning the "client's best interest" practice of several major banks, that have sold them debt securities bundled with toxic mortgage subprime loans.
JPMorgan Securities breached its fiduciary duty to certain clients
In this case, JPMorgan Chase and its subsidiaries have been directing clients to invest in the company's proprietary products without disclosing this preference. The clients of the New York headquartered bank have been misinformed by being deprived of information that could have impacted their decisions.
Commenting on the matter, the Director of SEC's enforcement division, Andrew Ceresney, said: “Firms have an obligation to communicate all conflicts so a client can fairly judge the investment advice they are receiving.”
Transparency has been a serious issue in the investment products market in recent years. High net worth and ultra-high net worth clients have not remained unscathed from the actions of JPMorgan's companies.
“These J.P. Morgan subsidiaries failed to disclose that they preferred to invest Client Money Client Money Client money refers to the money or margin – which may be any currency in the form of cash, check, draft, or electronic transfer – that a firm receives or holds for a client. Money held by a firm in the form of a stakeholder, which is are not payable on demand or immediately due, also refers to client money. The definition of client money does not apply to money held by businesses that operate in its own name on behalf of a client. Although the client does have to be in agreement before this arr Client money refers to the money or margin – which may be any currency in the form of cash, check, draft, or electronic transfer – that a firm receives or holds for a client. Money held by a firm in the form of a stakeholder, which is are not payable on demand or immediately due, also refers to client money. The definition of client money does not apply to money held by businesses that operate in its own name on behalf of a client. Although the client does have to be in agreement before this arr Read this Term 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,” Mr Ceresney explained.
Adding to the details, the Co-Chief of the SEC's enforcement division, Julie Riewe clarified: "In addition to proprietary product conflicts, JPMorgan Securities breached its fiduciary duty to certain clients when it did not inform them that they were being invested in a more expensive share class of proprietary mutual funds, and JPMorgan Chase Bank did not disclose that it preferred third-party-managed hedge funds that made Payments Payments One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl Read this Term to a JPMorgan affiliate."
The wrongdoings by the bank are likely to lead to further legal action from its clients, since the company has admitted to the wrongdoing in its settlement with the SEC and CFTC.