JPMorgan Chase to pay $307 million in penalties over disclosure issues

23 Dec 2015 | Author: | No comments yet »

J.P. Morgan Chase to pay $307 million for not telling clients about conflicts of interest.

JPMorgan Chase will pay $307 million in penalties to settle charges that it didn’t disclose conflicts of interest to investors when it steered them into the firm’s own funds.The company failed to call attention to the fact that two of its large wealth-management divisions favor investing in their own products, which are more expensive, Bloomberg reports.JPMorgan Chase is paying more than $300 million to settle allegations that it failed to tell clients that it favored its own pricier mutual funds and other investment products at their expense. The units also did not disclose financial incentives received for investing clients in third-party funds. “There was significant harm to clients here,” said Andrew Ceresney, enforcement director for the SEC. “The undisclosed conflicts were pervasive.” Between 2008 and 2013, J.P.

The degree of favoritism was high: The SEC said 47% of mutual fund assets and 35% of hedge fund assets were invested in its own products at one point in 2011. Those included having brokers push the bank’s more expensive mutual funds among other products, according to the Securities and Exchange Commission. “Firms have an obligation to communicate all conflicts so a client can fairly judge the investment advice they are receiving,” Andrew Ceresney, the SEC’s head of enforcement, said in a statement.

The fines, which come with an admission of wrongdoing by JPMorgan, are split between the SEC, which will receive $267 million, and the Commodities Futures Trading Commission, which will receive $40 million. “These J.P. JPMorgan has been penalized more than $23 billion by U.S. authorities in recent years, according to Bloomberg, settling allegations that included conspiring to manipulate foreign-currency rates, allowing its “London Whale” trader to exceed risk limits, failing to flag transactions related to Bernard Madoff’s Ponzi scheme and misrepresenting the value of mortgage-backed securities.

The allegations mirror concerns raised two years ago by a former JPMorgan broker, Johnny Burris, who leaked secret recordings of his bosses pressuring him and others to sell the bank’s own products rather than ones that would be cheaper for their clients. Private pilots can’t offer flight-sharing services to the public using an Internet model similar to those developed by Uber and Lyft, a federal appeals court ruled Friday. The ruling upholds a decision earlier this year by the Federal Aviation Administration that said the service offered by Boston-based Flytenow violates flight regulations.

Earlier this month, Burris told the New York Times that the JPMorgan subsidiary he worked for had pushed his former clients to sign statements that left black marks on his professional record. But the FAA said that posting a planned trip on a website was like advertising and subjected private pilots to the same safety regulations as pilots for commercial airlines. JPMorgan spokesman Darin Oduyoye provided this statement to HuffPost: “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. The bank will also pay a $40 million penalty to the CFTC and will disgorge $60 million in profits, an estimate of the “ill-gotten gains” it collected because of the poor and missing disclosures. Court of Appeals for the District of Columbia Circuit agreed with the FAA that rules prohibiting private pilots from being paid include partial payments made to cover flight expenses.

The three-judge panel also rejected Flytenow’s arguments that it wasn’t acting like a “common carrier.” The FAA’s decision would not end the long-standing practice of allowing pilots to let passengers share flight expenses, as long as the invitation is limited to defined groups, Judge Cornelia Pillard said. ● Unemployment rates fell in more than half of U.S. states in November as employers stepped up hiring. New Mexico had the nation’s highest unemployment rate in November, at 6.8 percent, unchanged from the previous month. ● CarMax earnings missed Wall Street forecasts for a third quarter, the used car dealership reported Friday.

Financial advisers and wealth managers are already held to the so-called fiduciary standard, which comes with requirements that advisers tell clients when there may be a conflict of interest affecting their recommendations. That compares with earnings of $130 million, or ● Brazil’s state-run news agency says Finance Minister Joaquim Levy is being replaced after just over a year on the job.

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