By Marcy Gordon
AP Business Writer
WASHINGTON (AP) - JPMorgan Chase is paying $307 million to settle federal charges of failing to reveal conflicts of interest from steering clients into certain investments tied to its businesses.
The civil settlements were announced last Friday by the Securities and Exchange Commission and the Commodity Futures Trading Commission. JPMorgan, the largest U.S. bank by assets, admitted wrongdoing in the settlements.
New York-based JPMorgan is paying a $127.5 million penalty in the settlement with the SEC and another $127.5 million in restitution plus $11.8 million in interest. Under the CFTC agreement, the bank is paying a $40 million penalty.
The wrongdoing was brought to light by a JPMorgan executive who reported it to the SEC, the law firm representing the unidentified executive said.
"My client never wanted to be a whistleblower, but believed the best way to protect JPMorgan clients and improve the sales culture of the organization - while avoiding retaliation and blacklisting - was to report these violations to the SEC," said Jordan Thomas, the attorney at the firm Labaton Sucharow who represents the executive.
The firm said the JPMorgan settlement likely is the largest SEC enforcement action to result from a whistleblower's initiative.
The regulators say JPMorgan didn't disclose to clients its preference for putting their money into hedge funds and mutual funds managed by its own affiliate. The preference affected the way clients' funds were divided among various investments and the selection of fund managers, so that clients lacked full information, they say.
Investment firms are allowed by law to invest clients' money in their own products and to prefer those products, but they cannot keep those preferences secret.
"Investors are entitled to know if a bank managing their money favors placing investments in its own proprietary funds or other vehicles that generate fees for the bank," CFTC Enforcement Director Aitan Goelman said in a statement. He said the regulators "will aggressively pursue financial institutions that fail to provide adequate disclosures to clients."
JPMorgan also agreed in the settlements to refrain from future violations. The SEC also censured JPMorgan, bringing the possibility of a stricter sanction if a violation is repeated.
JPMorgan said it regrets the failure to disclose the information, which wasn't intentional. "We remain confident in our investment process and are proud of the way we manage money," spokesman Darin Oduyoye said in a statement. "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," he said.
Published: Tue, Dec 22, 2015
