MutualFundWire.com: Will JPMAM Settle For $200MM?

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Friday, December 18, 2015

Will JPMAM Settle For $200MM?

Today may mark the $200-million resolution of the proprietary-mutual-fund-favoritism accusations against J.P. Morgan [profile].

John Donohue
J.P. Morgan Asset Management, Americas
Chief Executive Officer

Sarah Lynch of Reuters reports that today the bank is expected to settle civil charges from the SEC and the CFTC (which regulates commodities and options trading), over not properly disclosing fees and conflicts involved in putting its own private banking clients into its own hedge funds and mutual funds. Per an unnamed source, the wire service expects the price tag of the settlement to be "at least $200 million."

A J.P. Morgan spokesman declined to comment to Reuters.

Three years ago the New York Times raised such concerns about J.P. Morgan's proprietary fund usage, and a year later American Banker reported that the OCC (which regulates banks) was digging into a similar possible issue involving what was then J.P. Morgan's proprietary retirement plan recordkeeping business. (Great-West bought the bulk of J.P. Morgan's retirement plan business last year and combined it with the Great-West and Putnam retirement plan businesses to create the defined contribution recordkeeping titan Empower).

In 2014 Bloomberg and the Wall Street Journal reported that the SEC was looking into potential conflicts of interest regarding sales of J.P. Morgan's proprietary funds. Reportedly, the SEC kicked the "guided architecture" investigation in April of this year, then sent subpoenas and even included J.P. Morgan in its broader, multi-year "Distribution in Guise" sweep that later smacked First Eagle.

As recently as four months ago, JPMAM was reportedly mere weeks away from an SEC settlement, though at that time the price tag sounded a bit lower, upwards of $150 million. And the bank's then-recent 10-Q highlighted the SEC's main concerns as "disclosures concerning the use of hedge funds that pay placement agent fees to J.P. Morgan Chase broker-dealer affiliates" and "client disclosures concerning conflicts associated with the Firm's sale and use of proprietary products, such as J.P. Morgan mutual funds, in the Firm's wealth management business."

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