JP Morgan to pay $307 million to settle SEC, CFTC disclosure charges

Fri Dec 18, 2015 12:40pm EST
 
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By Sarah N. Lynch

WASHINGTON (Reuters) - JP Morgan Chase will pay $307 million to settle two U.S. government cases that charged the bank with failing to disclose certain conflicts of interest to some of its wealth management clients, U.S. regulators said on Friday.

The Securities and Exchange Commission said that two of the bank's wealth management units have agreed to admit to wrongdoing and pay $267 million to settle the charges. The bank will also pay $40 million to settle parallel charges with the Commodity Futures Trading Commission.

“We have always strived for full transparency in client communications, and in the last two years have further enhanced our disclosures in support of that goal,” said Darin Oduyoye, a J.P. Morgan spokesman. 

“The disclosure weaknesses cited in the settlements were not intentional and we regret them," he added.

The settlement announcement on Friday was anticipated and the bank had previously disclosed the investigation to investors in its corporate filings.

The SEC said the bank's wealth business preferred to invest its clients in its own proprietary products, but J.P. Morgan failed to tell investors about this preference.

Between 2008 and 2013, that failure affected both retail mutual fund customers and high net worth clients, who invested in hedge funds and mutual funds offered through J.P. Morgan's private bank, the SEC said.

Julie Riewe, a co-chief of the SEC's asset management enforcement unit, said on Friday the bank also "breached its fiduciary duty" by not telling customers they were being invested in a more expensive share class of proprietary mutual funds.   Continued...

 
A view of the exterior of the JP Morgan Chase & Co. Corporate headquarters in the Manhattan borough of New York City, May 20, 2015. REUTERS/Mike Segar