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From Securities Regulation Daily, January 6, 2016
J.P. Morgan’s brokerage subsidiary must pay a $4 million penalty for falsely claiming that its brokers were compensated based on portfolio performance, the SEC announced. The misleading statement had appeared in the marketing materials aimed at high net worth potential customers for three years, despite employees notifying the marketing team of its inaccuracy four times (In the Matter of J.P. Morgan Securities LLC, Release No. 33-10001, January 6, 2016).
Misleading statements. The SEC alleged that J.P. Morgan Securities LLC (JPMS) stated on the website for its Private Bank unit that its registered representatives were compensated “based on our clients’ performance.” The statement also appeared on a prospecting card, a pitch book, and a marketing letter. The statement about broker compensation, which was first used in 2009, was materially misleading because none of the factors used by JPMS to calculate broker compensation were tied to portfolio performance, according to the SEC. Brokers were paid a discretionary bonus based on a number of factors but not on the performance of the investments in customer accounts.
The SEC also alleged that, despite concerns raised on four different occasions by a vice president, a compliance officer, and a broker between 2009 and 2011, the misleading statement on the marketing materials was not corrected until May 2012.
Sanctions. To settle the matter, JPMS agreed to pay a civil monetary penalty of $4 million. JPMS also agreed to be censured and to cease and desist from committing further violations. The SEC’s order instituting settled administrative proceedings noted that the SEC took into consideration remedial acts undertaken by JPMS in determining to accept the offer of settlement. JPMS did not admit or deny the SEC’s findings.
The release is No. 33-10001.
Companies: J.P. Morgan Securities LLC
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