(Bloomberg) — JPMorgan Chase & Co. put allegations of currency-fixing largely behind it with a guilty plea, but it’s not out of the woods yet.
With its new felony record, America’s biggest bank needs to seek the Department of Labor’s permission to keep managing money in the $8 trillion private pension market. At the same time, there’s a cloud over the JPMorgan unit where pensions are managed: The Securities and Exchange Commission is well along in an investigation into conflicts of interest in the bank’s wealth-management unit, whose products include individual retirement accounts.
That puts the bank in a sticky position — arguing that a criminal conviction shouldn’t keep it from managing Americans’ retirement savings, while the SEC is investigating possible wrongdoing in the same division that handles such business.
“When a bank has enforcement action after enforcement action, it becomes hard to argue that it won’t happen again,” says Urska Velikonja, an assistant law professor at Emory University whose research focuses on securities law.
JPMorgan spokesman Darin Oduyoye declined to comment “on Bloomberg speculation over future events.”
The May 20 guilty pleas by America’s biggest bank and four others — Citigroup Inc., Barclays Plc, Royal Bank of Scotland Plc and UBS Group AG — required each to apply for regulatory exemptions from the SEC, as well as from the LaborDepartment, to carry on business as usual. The SEC issued the necessary approvals for the banks, but Democrats on Capitol Hill, as well as on the SECCommission, have criticized rubber-stamping of waiver requests.
Bank of America Corp. lost its ability late last year to issue certain securities without first seeking SECpermission. Credit Suisse Group AG is operating its $2 billion pension business under a temporary, one-year waiver while the Labor Department conducts an extensive review of whether to grant the Swiss bank’s request for permanent relief.
The stakes are higher for JPMorgan Asset Management, the quickly growing business unit that includes mutual funds, private wealth management and some trusts. Its assets under management included $319 billion in U.S. pension funds at the end of 2014, according to Pensions & Investments.
On the day last week when JPMorgan pleaded guilty to antitrust violations for manipulating currency rates, the bank applied to the Labor Department for an exemption to continue managing pensions as a Qualified Professional Asset Manager.
Banks rely on their QPAM status to carry out key transactions for pension clients, and a plea by any bank affiliate anywhere in the world triggers the need for it to apply for an exemption to maintain that business. JPMorgan needs to secure the waiver before it is sentenced.
The Labor Department has taken several months or more, in most cases, to carry out similar reviews. Michael Trupo, a Labor Department spokesman, declined to comment.