JP Morgan agreed to pay $151 million to settle SEC charges alleging misleading disclosures, prohibited joint transactions, failures to make recommendations in customers' best interests, and breach of fiduciary duty. The SEC specifically noted that "JP Morgan's conduct across multiple business lines violated various laws designed to protect investors from the risks of self-dealing and conflicts of interest."
According to the SEC, JP Morgan Securities made misleading disclosures to its customers in Conduit private funds, which operates as a pool of multiple customers' money that is invested in private equity or hedge funds. The SEC wrote that JP Morgan exposed investors to undue market risk, leading to significant decreases in share values, as JP Morgan took months to sell shares, failing to disclose that its affiliate exercised "complete" discretion over when to sell and how much to sell.
JP Morgan also purportedly failed to disclose financial incentives or interests the firm or its advisors had when they recommended the JP Morgan Portfolio Management Program over third-party programs.
The firm also purportedly recommended Clone Mutual Funds products to retail customers when materially less expensive exchange-traded funds (ETFs) were available. SEC staff concluded that JP Morgan failed to have a reasonable basis to believe their recommendations were in the customers' best interests.
Also named in the enforcement action, JP Morgan Investment Management purportedly caused $4.3 billion in prohibited joint transactions and additionally engaged in or caused 65 prohibited principal trades totalling $8.2 billion. Principal trades are ordinarily prohibited in order to avoid conflict of interest situations, and the SEC's order cited JP Morgan for failing to abide by the conflict of interest rules regarding this.
If you invested with JP Morgan or any affiliate whose disclosure failures or inaccuracies, undisclosed conflicts of interest, prohibited transactions, suitability or best interest violations, or breaches of fiduciary duty have resulted in damages such as losses or excessive fees, please call an experienced FINRA arbitration attorney at The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.