Banking

JPMorgan fined $250 million over problems in advisory business

JPMorgan Chase will pay a $250 million fine for poor risk management practices and conflicts of interest in its advisory business, the Office of the Comptroller of the Currency said Tuesday.

The $3.2 trillion-asset company had warned in early November that it might have to pay a penalty for shortcomings in internal controls and internal audit tied to certain advisory and other activities.

Indeed, “the OCC found the bank’s risk management practices were deficient and it lacked a sufficient framework to avoid conflicts of interest,” the agency said in a news release announcing the civil money penalty.

However, JPMorgan did not admit guilt in the matter, the OCC said in a seven-page order that detailed the agency’s findings.

It is JPMorgan’s second major fine this fall: In September, the company agreed to pay the Commodity Futures Trading Commission and other agencies $920 million for manipulating the markets for precious metals and Treasury securities.

JPMorgan’s fiduciary business provides a range of investment strategies and vehicles to clients handling $29.1 trillion in assets. The OCC found that for “several years” JPMorgan had a “weak” management and control program for that business line and an “insufficient” auditing program to catch any problems.

Conflicts of interest arise “whenever a bank engages in self-dealing and in any situation where a bank’s ability to act in the best interests of its account beneficiaries or clients is impaired,” according to the OCC. This can happen when banks direct investors to their own brokers or funds.

There was no evidence provided in the OCC documents that a client was harmed financially, nor are there any requirements in the order for JPMorgan to change the way the company manages assets for clients. JPMorgan has fixed the deficiencies that led to the fine, the order said.

“We are committed to delivering best-in-class controls across our business, and we have invested significantly in and enhanced our controls platform over the last several years to address the issues identified,” a JPMorgan spokesperson said.

Banks are reportedly rushing to settle federal investigations before President-elect Joe Biden takes office because he is expected to put a tougher regulatory framework in place.

The penalty announced Tuesday will be paid to the U.S. Treasury, the OCC said.


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