January 6, 2016


J.P. Morgan has agreed to pay $4 million to settle fraud charges brought against its brokerage unit by United States Securities and Exchange Commission for falsely stating on its private banking website and marketing materials that advisors are compensated based on client’s performance.

The investigation, conducted by SEC staff in the Miami office, found that the bank’s brokerage unit did not pay its registered representatives as it stated on its website, but instead paid them a salary and discretionary bonus.

According to the SEC’s suit, JPMS made fraudulent statements to current and prospective customers on its private banking website, and marketing materials, as well as a private banking website for its Tampa regional office about its broker compensation from 2009 to 2012, despite the fact that employees pointed out to the company- on four occasions, from March 2009 to February 2011- that the statement was inaccurate.

SEC said JPMS did not correct the misstatement until May 2012- in some of its marketing materials -more than three years after it was first notified by employees.

Andrew J. Ceresney, Director of the SEC Enforcement Division said JPMS misled customers into believing that “brokers had skin in the game and were being compensated based on the success of customs portfolios. But none of the factors JPMS used to determine broker compensation was tied to portfolio performance,” said Mr. Ceresney., LLC

“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 compensation of its register representatives was tied to the success of the client’s portfolio.”

In addition to the $4 million fines, the bank is censured and will cease and desist from committing or causing any violations and any such future violations.
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