Key Takeaways
- The Securities and Exchange Commission (SEC) said JPMorgan Chase & Co.’s confidentiality agreements prohibited their advisory and brokerage clients from contacting the agency regarding a financial settlement.
- The alleged blocking of clients’ communication with the SEC is a violation of whistleblower protection law.
- JPMorgan will pay $18 million in civil penalties over the allegation.
- The bank didn’t admit or deny the charges as part of the settlement.
JPMorgan Chase (JPM) settled charges with the Securities and Exchange Commission (SEC) Tuesday over allegations it impeded hundreds of advisory clients and brokerage customers from reporting potential violations of securities law.
The nation’s largest bank agreed to pay $18 million in civil penalties.
The SEC said JPMorgan asked clients to sign a confidentiality agreement if they had been issued a credit or settlement of more than $1,000. The agreements, which required clients to keep facts and details confidential, also prohibited clients from contacting the SEC, though the company did permit response to SEC inquiries. The requirements violated whistleblower protection law, the SEC said.
“For several years, it forced certain clients into the untenable position of choosing between receiving settlements or credits from the firm and reporting potential securities law violations to the SEC,” said Gurbir S. Grewal, SEC enforcement director. “This either-or proposition not only undermined critical investor protections and placed investors at risk, but was also illegal.”
In its settlement, JPMorgan neither admitted or nor denied the charges, while agreeing to the fine and to change its contract provisions.
A company spokesperson said JPMorgan takes its regulatory obligations seriously and “promptly took action to resolve this issue.”