NEW YORK CITY: US regulators fined JPMorgan Chase $307 million Friday for failing to disclose conflicts of interests to clients when it recommended proprietary investment products over third-party options.
From 2008-2013, JPMorgan failed to make clear to investment clients numerous conflicts of interests, including its preference for JPMorgan-managed mutual funds over other funds, according to the US Securities and Exchange Commission (SEC).
JPMorgan, the biggest US bank by assets, also did not tell investors that some JPMorgan-managed mutual funds offered a less expensive share class than the one recommended, which meant higher revenues for the JPMorgan affiliate.
It also did not tell clients that JPMorgan preferred to invest clients in third-party-managed hedge funds that shared management or performance fees with JPMorgan, regulators said.
JPMorgan admitted wrongdoing and agreed to pay $307 million in penalties, according to an SEC statement. That includes a $40 million fine the bank will pay to the Commodities and Futures Trading Commission in a parallel case.
“Clients are entitled to know whether their adviser has competing interests that might cause it to render self-interested investment advice,” said Julie Riewe, co-chief of the SEC enforcement division’s asset management unit.
JPMorgan has enhanced its disclosures over the last two years in an effort at “full transparency in client communications,” bank spokesman Darin Oduyoye told Agence France-Presse.
“The disclosure weaknesses cited in the settlements were not intentional and we regret them. We remain confident in our investment process and are proud of the way we manage money.”