The New York Times editorial, “Want to Buy a Mutual Fund?” aptly chose the nation’s 236th birthday on July 4 to underscore the vital role of fiduciary law in American history. It did so by reminding its readers that the SEC’s efforts to apply the fiduciary standard to brokers “have been stymied by financial-industry opposition and weak Congressional support.” True enough.
This pro-fiduciary editorial came on the heels of a Times news article that reported on JPMorgan’s successful and profitable efforts to promote its own proprietary mutual funds ahead of non-proprietary funds. The story notes, “It is a controversial practice, and many companies have backed away from offering their own funds because of the perceived conflicts,” but that JPMorgan defends its program. The defense is not, according JPMorgan, that brokers are not required in law to put clients’ interests first, but that its in-house expertise is impressive and that customers want access to in-house funds.
So far, so good.
But then, apparently, JPMorgan’s legal team goes overboard, and proceeds to put the bank in an entirely untenable position. The Times story quotes a spokesman: “We always place our clients first in every decision,” said Melissa Shuffield.