JPMorgan Chase to pay $151M in penalties, restitution to settle disclosure lapses

JPMorgan Securities (JPMS) and JPMorgan Investment Management (JPMIM), both registered investment advisers, agreed to pay a total of $151 million in penalties and voluntary payments to investors for “misleading disclosures to investors, breach of fiduciary duty, prohibited joint transactions and principal trades, and failures to make recommendations in the best interest of customers,” the SEC said Thursday in a press release. JPMS is also registered as a broker-dealer with the SEC.

According to the agency, JPMS will return $90 million to 1,500 investors for making misleading disclosures regarding a private fund product, and pay a $10 million fine that will also be dispersed to affected investors. JPMorgan self-reported the issue to the SEC, after several investors had complained that their investment advisers had failed to sell certain shares in a timely manner, during which time the shares lost value, the SEC said in one of its order.

The firm will pay an additional $45 million for failing to fully and fairly disclose conflicts of interest that its financial advisers had when they recommended the company’s own portfolio management program over other third-party managed programs also offered by the firm. The company also failed to implement compliance policies and procedures properly designed to prevent violations of the Advisers Act related to conflicts of interest, per a separate order.

The SEC assessed a $15.2 million fine on JPMS for violating Regulation Best Interest when its investment advisers recommended certain mutual fund products to its retail brokerage clients when other, materially less expensive products that offered the same services were available.

JPMIM will pay $5 million to resolve allegations that it engaged in prohibited transactions by favoring an affiliated foreign money market fund, for which it served as a delegate portfolio manager, over three other U.S. money market funds that it advised. The SEC fined JPMIM $1 million for engaging in 65 trades worth $8.2 billion that were prohibited because they had undisclosed conflicts of interest, and the firm did not meet certain conditions or apply to the SEC for relief.

JPMorgan’s investment adviser business has been hit with a number of fines this year, including $348 million in fines levied by two regulators in March over trade surveillance lapses, followed by a related $100 million fine by the Commodity Futures Trading Commission in May.

In an emailed statement, a spokesperson at the bank said it ”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. We are pleased to have these matters resolved and remain dedicated to delivering an exceptional experience for our clients,” the statement read.

JPMorgan Chase agreed to settle without admitting or denying the SEC’s findings