JPMorgan to pay $18M for blocking client contact with SEC
The SEC ordered JPMorgan to pay an $18 million fine to settle charges that it tried to prevent clients from alerting the agency if they suspected the firm had violated securities laws, the agency announced Tuesday.
From 2020 through July 2023, J.P. Morgan Securities, a subsidiary of JPMorgan Chase & Co., asked some clients in advisory accounts and customers in brokerages accounts to sign a release that said they would keep confidential credits or settlements from the firm that exceeded $1,000. The clients were not permitted to disclose the agreement or any other information about the account unless it was in response to an inquiry from the Securities and Exchange Commission.
The agreement prohibited J.P. Morgan Securities clients from voluntarily communicating with the SEC concerning potential securities law violations, the SEC order states. The arrangement violated the whistleblower protection provision of the Dodd-Frank financial reform law, which provides financial incentives to encourage investors and others to report suspected wrongdoing, the SEC charged.
The release stated that the J.P. Morgan Securities client “promises not to sue or solicit others to institute any action or proceeding against [JPMS] arising out of events concerning the account,” according to the SEC. The release also said that if the client violates the agreement, the client could be sued by J.P. Morgan Securities.
The SEC issued a cease-and-desist order against J.P. Morgan Securities, censured the firm and imposed the $18 million civil penalty.
“Whether it’s in your employment contracts, settlement agreements or elsewhere, you simply cannot include provisions that prevent individuals from contacting the SEC with evidence of wrongdoing,” Gurbir
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