J.P. Morgan Securities LLC agreed Wednesday to pay $4 million to settle charges by the Securities and Exchange Commission that it misled customers about its brokers’ compensation on the firm’s private website and in marketing materials.

The brokerage firm’s website and marketing materials stated that its advisors were compensated “based on our clients’ performance; no one is paid on commission.” 

However, an SEC investigation found that although J.P. Morgan Securities did not pay commissions to registered reps in its U.S. Private Bank, compensation was not based on client performance. Advisors were instead paid a salary and a discretionary bonus based on a number of other factors.

“JPMS misled customers into believing their brokers had skin in the game and were being compensated based on the success of customer portfolios,” said Andrew Ceresney, director of the SEC’s enforcement division. “But none of the factors JPMS used to determine broker compensation was tied to portfolio performance.”

According to the SEC’s order instituting a settled administrative proceeding, J.P. Morgan Securities made the false and misleading statement about broker compensation from 2009 to 2012 to current and prospective customers on JPMS’ private banking website as well as a private banking website for its Tampa regional office. 

Among the marketing materials that included the misstatement were a prospecting card, a pitch book and a marketing letter.

While JPMS employees identified the broker compensation statement as inaccurate on four occasions from March 2009 to February 2011, JPMS failed to correct the misstatement on each of those occasions.

“It wasn’t until May 2012 – more than three years after it was first made – that the misstatement was corrected by JPMS in some marketing materials,” the SEC states.

 Eric Bustillo, director of the SEC’s Miami Regional Office, added that “broker-dealers like JPMS have self-interest in representing that their monetary interests are aligned with their customers. JPMS misled customers by falsely claiming that the compensation of its registered representatives was tied to the success of the client’s portfolio.”

Without admitting or denying the findings, JPMS consented to the entry of the SEC’s order finding violations of Section 17(a)(2) of the Securities Act of 1933, and agreed to pay the $4 million penalty. The BD also agreed to be censured and must cease and desist from committing or causing any violations and any such future violations.