The SEC has ordered JPMorgan to pay a $1.5 million fine plus restitution over the firm’s mutual fund share class selection for certain clients, the regulator says.
From at least January 2010 through December 2015, the company allegedly failed to determine that certain retirement plan and charitable organization clients were eligible for load-waived Class A mutual fund shares, according to an administrative proceedings document published by the SEC.
As a result, JPMorgan allegedly sold these clients the more expensive Class A shares with upfront sales charges or Class B or C shares with back-end sales charges in at least 58,000 transactions, which affected 16,734 eligible client accounts, the regulator says.
In addition, the company allegedly didn’t disclose to the clients that it would receive higher compensation from the more expensive share class of mutual funds and that the client’s investment performance would be impacted as a result, according to the document.
JPMorgan consented to pay a $1.6 million fine, $251,083 in disgorgement and $71,355 in prejudgment interest without admitting or denying the SEC’s findings, the regulator says.
In determining the extent of the sanctions, the SEC considered JPMorgan’s cooperation and its remedial steps, such as identifying and converting eligible clients into the lower-price share class and reimbursing around 16,335 accounts with $7.3 million for transactions during the period in the case and $8.7 million for transactions from before that period, according to the document.
The SEC has been aggressively going after alleged share class violations in recent months, doling out large fines.
In November, the regulator fined Morgan Stanley $1.5 million over an alleged coding error that resulted in certain eligible customers missing out on sales charge waivers they were owed. The same month, the SEC fined Merrill Lynch, Raymond James & Associates and Raymond James Financial Services $12 million over alleged violations involving share class selection in tax-advantaged 529 savings plans.