JPMorgan Settles with SEC for $151 Million

JPMorgan Chase has agreed to a $151 million settlement with the U.S. Securities and Exchange Commission (SEC) following multiple enforcement actions involving its affiliates, JPMorgan Securities (JPMS) and JPMorgan Investment Management. Announced Thursday, the settlement addresses allegations of misleading disclosures, fiduciary duty breaches, and other regulatory violations.

Misleading disclosures in Conduit private funds

A key case involved JPMS’s Conduit private funds, where the firm was found to have provided deceptive information to investors. These funds, primarily invested in private equity and hedge funds, reportedly misrepresented JPMorgan's control over stock sales, resulting in substantial losses tied to market fluctuations. To resolve this, JPMS will compensate affected investors by distributing $90 million across more than 1,500 accounts and will pay an additional $10 million in fines.

Incentive disclosures and conflicts of interest

The SEC also revealed that JPMS failed to disclose financial incentives that encouraged advisors to prioritize JPMorgan's proprietary Portfolio Management Program. This program saw assets under management surge from $10.5 billion to over $30 billion. The SEC deemed this a violation of the Advisers Act, leading to a $45 million penalty for JPMS.

Furthermore, JPMS allegedly recommended higher-cost "Clone Mutual Funds" to clients instead of more affordable ETFs with similar portfolios, affecting over 10,000 clients. This breach of the SEC’s Regulation Best Interest (Reg BI) has led JPMS to return $15.2 million to impacted customers.

Penalties for preferential transactions

In separate actions, JPMorgan Investment Management faced penalties for practices that benefited its affiliated entities over U.S.-based clients. These included a $5 million penalty for engaging in $4.3 billion in prohibited joint transactions in March 2020 and an additional $1 million fine for principal trades involving commercial paper and other short-term securities without adequate disclosures.

JPMorgan reiterated its commitment to high standards in client service and stated that it continues to work closely with regulators to address and resolve these issues.