SEC Fines J.P. Morgan Securities $1.5 Million for Fund Overcharges
The Securities and Exchange Commission has fined J.P. Morgan Securities $1.5 million, in its latest sanction against firms that sold certain retirement plan and charitable organization customers overpriced mutual fund shares when less expensive fund classes were available.
J.P. Morgan, which accepted the settlement without admitting or denying the regulator’s findings, agreed to disgorge $251,083, including $71,355 in prejudgement interest, in addition to the $1.5 million fine.
The firm’s alleged system-and-control failures affected 16,734 customers who paid $16.3 million in upfront sales charges or other unnecessary fees that should have been waived, the SEC said.
J.P. Morgan Securities voluntarily identified the customers and issued payments or credits in advance of the settlement, according to the order. It also converted those holding Class B and C shares that had “trails” to brokers, to the lowest-expense Class A share holdings at no charge, it said.
“We are pleased to have resolved this matter,” said a J.P. Morgan spokeswoman. “Nearly all impacted clients have been fully reimbursed and we’ve since made a number of changes to correct this issue.”
Securities regulators have for more than a decade imposed censures and monetary penalties for mutual fund share-class sales and disclosure violations involving a range of customers
The SEC two months ago fined Morgan Stanley Smith Barney $1.5 million for similar fund-share errors involving retirement and charitable accounts.
Merrill Lynch and Raymond James Financial in September agreed to pay more than $12 million to customers who were sold unsuitable fund share classes in 529 college savings account plans in a settlement with the Financial Industry Regulatory Authority.