SEC fines JPM Morgan Chase for whistle-blowing violation charge

By Steve Gelsi

Bank agrees to pay $18M fine without admitting or denying wrongdoing for retail client confidentiality agreements between 2020 and 2023

JPMorgan Chase & Co. has agreed to pay an $18 million fine without admitting or denying charges by the U.S. Securities and Exchange Commission that it violated whistleblower protection rules with its confidentiality agreements during a three-year period.

The SEC said in a statement that JPMorgan (JPM) regularly asked retail clients and brokerage customer to sign confidentiality release agreements when receiving a credit or settlement from the bank of more than $1,000.

The agreements did not permit clients to voluntarily contact the SEC, although they did allow permitted clients to respond to SEC inquiries.

The SEC said the practice began in March of 2020 and ended in July of 2023.

"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 S. Grewal, director of the SEC's enforcement division, said in a statement. "But that's exactly what we allege J.P. Morgan did here."

A JPMorgan spokesperson said, "We take our regulatory obligations seriously and promptly took action to resolve this issue," in an email to MarketWatch.

The SEC said the confidentiality agreements "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."

The SEC's whistleblower rule prohibits action that would impede an individual from communicating directly with its staff about possible securities law violations.

Also read: Morgan Stanley hit with $249 million fine for block-trading fraud

-Steve Gelsi

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01-16-24 1115ET

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