Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Regulation and Compliance > Federal Regulation > SEC

J.P. Morgan Securities to Pay SEC $1.5M for Share Class Violations

Your article was successfully shared with the contacts you provided.

The Securities and Exchange Commission ordered J.P. Morgan Securities to pay a $1.5 million civil money penalty for failing to provide certain retail retirement account and charitable organization brokerage customers with sales charge waivers and lower fee share classes.

In a Jan. 9 administrative proceeding, the agency also ordered the unit to pay $251,083 in disgorgement as well as prejudgment interest of $71,355.

From at least January 2010 through December 2015, JPMS “disadvantaged certain retirement plan and charitable organization brokerage customers who maintained accounts at JPMS by failing to ascertain that they were eligible for a less expensive share class, and recommending and selling them more expensive share classes in certain open-end registered investment companies when less expensive share classes were available,” the SEC order states.

JPMS did so without disclosing that it would receive greater compensation from the eligible customers’ purchases of the more expensive share classes, according to the order.

Also, eligible customers did not have sufficient information to understand that JPMS had a conflict of interest resulting from compensation it received for selling the more expensive share classes.

JPMS recommended and sold these eligible customers Class A shares with an up-front sales charge, or Class B or Class C shares with a back-end contingent deferred sales charge (a deferred sales charge the purchaser pays if the purchaser sells the shares during a specified time period following the purchase) and higher ongoing fees and expenses, when they were eligible to purchase load-waived Class A shares, the order states.

JPMS omitted material information concerning its compensation when it recommended the more expensive share classes, according to the order.

JPMS also failed to disclose that the purchase of the more expensive share classes would hurt the overall return on the eligible customers’ investments, in light of the different fee structures for the different fund share classes.

— Check out SEC’s Avakian Details Next 12b-1 Fee Crackdown on ThinkAdvisor.


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.