On Wednesday, J.P. Morgan Securities LLC (JPMS), a unit of JPMorgan Chase & Co. JPM reached an agreement with the Securities & Exchange Commission (SEC) under which the U.S. bank will be paying $4 million as penalty. The SEC’s investigation revealed misleading statements by the bank on its private banking website and in marketing materials about broker compensation from 2009 to 2012. The banking giant fraudulently stated advisors are compensated “based on our clients’ performance; no one is paid on commission.”
“JPMS misled customers into believing their brokers had skin in the game and were being compensated based on the success of customer portfolios. But none of the factors JPMS used to determine broker compensation was tied to portfolio performance,” said Andrew J. Ceresney, Director of the SEC Enforcement Division.
As per the SEC’s revelations, registered representatives in JPMorgan’s U.S. Private Bank are not paid any commissions. Instead salary is paid to advisors along with a flexible bonus depending on a number of other factors and not on client performance.
However, the charges have not been admitted or denied by JPMorgan, but the bank agreed to the violations of Section 17(a) (2) of the Securities Act of 1933 and the settlement. Notably, the false statements were not corrected until May 2012.
Banks across the globe have been facing increasing scrutiny for their business practices. Many of the firms have paid billions of dollars as fines and compensation to settle lawsuits and probes. Many investors have lost their hard-earned money as a result of such business malpractices. Such settlements help restore their confidence in law-enforcement agencies. Moreover, it reduces the existing litigation burden of banks.
JPMorgan currently carries a Zacks Rank #3 (Hold). Some better-ranked finance stocks include Enterprise Financial Services Corp. EFSC with a Zacks Rank #1 (Strong Buy), while First Busey Corporation BUSE and Old National Bancorp. ONB carry a Zacks Rank #2.
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