WASHINGTON (CN) - J.P. Morgan Securities will shell out $4 million to settle charges that it lied about how it pays investment advisers.
A brokerage business under the umbrella of JPMorgan Chase & Co., J.P. Morgan Securities purported on its private banking website and in marketing materials to compensate advisers "based on our clients' performance; no one is paid on commission."
The Securities and Exchange Commission brought charges after its investigation showed that "none of the factors JPMS used to determine broker compensation was tied to portfolio performance," SEC enforcement division director Andrew Ceresney said in a statement.
Although J.P. Morgan Securities was honest about not paying commissions, "compensation was not based on client performance," the SEC said in a statement Wednesday.
The brokerage actually paid advisers salaries and discretionary bonuses based on various factors.
"JPMS misled customers into believing their brokers had skin in the game and were being compensated based on the success of customer portfolios," Ceresney said.
The SEC's order instituting a settled administrative proceeding on Wednesday sayd that JPMS made the false statement about broker compensation from 2009 to 2012.
Both current and prospective customers were given this misleading information on the company's private-banking website, as well as a private banking website for its Tampa regional office.
A prospecting card, a pitch book and a marketing letter were among the marketing materials that included the misstatement, the SEC added.
Though brokerage employees flagged the statement as inaccurate on four occasions from March 2009 to February 2011, "JPMS failed to correct the misstatement on each of those occasions," the SEC's statement continues.
The SEC said J.P. Morgan Securities finally corrected the statement in some marketing materials in May 2012.
In agreeing to pay a $4 million penalty, the bank is not admitting or denying the SEC's findings. It did agree "to be censured and must cease and desist from committing or causing any violations and any such future [Securities Act] violations."