Client Who Reported Securities Violations Led to $267 Million SEC Enforcement Action
NEW YORK (December 18, 2015) – Labaton Sucharow LLP, which established the first national practice exclusively dedicated to representing Securities and Exchange Commission (SEC) whistleblowers, announced today that one of the Firm’s clients reported the securities violations that led to the SEC’s groundbreaking enforcement action charging J.P. Morgan Securities LLC (JPMS) and JPMorgan Chase Bank N.A. (JPMCB) with, among other things, preferring to invest clients in the firm’s own proprietary investment products without properly disclosing this preference. This preference impacted two fundamental aspects of money management—asset allocation and the selection of fund managers—and deprived JPMorgan’s clients of information they needed to make fully informed investment decisions.
To resolve this serious matter, J.P. Morgan agreed to pay more than $267 million. Since the inception of the SEC Whistleblower Program, this case is believed to be the largest and highest profile enforcement action initiated by an SEC whistleblower.
According to the SEC’s order instituting proceedings, JPMS failed to disclose numerous conflicts of interest to certain wealth management clients from 2008 to 2013:
- JPMS failed to disclose its preference for J.P. Morgan-managed mutual funds for retail investors in a unified managed account program known as the Chase Strategic Portfolio (CSP) that was sold through Chase Bank branches.
- JPMS failed to disclose that the availability and pricing of services provided to JPMS by another J.P. Morgan affiliate was tied to the amount of CSP assets invested in J.P. Morgan proprietary products.
- JPMS failed to disclose that certain J.P. Morgan-managed mutual funds purchased for CSP clients offered a less expensive share class and would generate less revenue for a JPMS affiliate than the share class JPMS chose for CSP clients.
- JPMS’ Forms ADV for CSP failed to adequately disclose these conflicts of interest.
- JPMS failed to implement written policies and procedures reasonably designed to prevent the violations that occurred.
Due to the unique protections and incentives offered by the SEC Whistleblower Program, Labaton Sucharow’s client reported the charged securities violations at J.P. Morgan to the SEC. This important investor protection program has broad international reach and offers eligible whistleblowers the ability to report anonymously and the opportunity to earn substantial monetary awards—regardless of nationality. To ensure that adequate funds are available to pay awards, Congress has established a replenishing Investor Protection Fund, which has a current balance in excess of $400 million.
For more information, contact:
Zach Kouwe Dukas Linden Public Relations