The Securities and Exchange Commission (SEC) has imposed an $18 million penalty on JP Morgan for obstructing clients and brokerage customers from reporting legal violations to regulatory authorities. The financial institution has consented to pay this fine.
According to the SEC, between March 2020 and July 2023, JP Morgan included provisions in its contracts that hindered clients from contacting the SEC with evidence of legal violations. This scenario forced clients to choose between receiving settlements, credits, and services or reporting wrongdoing to the SEC.
Corey Schuster, co-chief of the enforcement division’s asset management unit, emphasized the importance of protecting investors, stating, “Investors, whether retail or otherwise, must be free to report complaints to the SEC without any interference. Those drafting or using confidentiality agreements need to ensure that they do not include provisions that impede potential whistleblowers.”
The charges against JP Morgan stemmed from violations of the whistleblower protection rule established under the Securities Exchange Act of 1934, which prohibits institutions from preventing individuals from reporting securities law violations to SEC staff.
JP Morgan has agreed to cease the challenged practices.