JPMorgan Chase & Co. now has a felony record that could put its asset management unit in handcuffs.
Pleading guilty to currency-fixing hasn’t put an end to J.P. Morgan’s problems, Bloomberg reports. The Goliath bank’s asset management arm is getting squeezed as J.P. Morgan argues that it should continue managing retirement savings and the SEC turns its magnifying glass on the wealth management arm. J.P. Morgan will need Department of Labor (DoL) permission to continue managing private pension money. The firm, which had $319 billion in U.S. pension funds under management at the end of 2014, applied for its DoL exemption soon after entering its guilty plea. The bank needs that exemption before sentencing in order to continue business as usual. Writes Bloomberg:
“When a bank has enforcement action after enforcement action, it becomes hard to argue that it won’t happen again,” says Urska Velikonja, an assistant law professor at Emory University whose research focuses on securities law.
The SEC is examining allegations that J.P. Morgan employees in the wealth management unit have been putting client money into the bank’s funds and products regardless of whether it was the best choice for the clients.
Other banks and asset management firms have gotten slammed by the SEC recently. In 2014, Bank of America was banned from issuing certain securities without SEC permission. Credit Suisse Group’s $2 billion pension arm is operating under a one-year waiver. It is unlikely that the banks will be denied waivers to continue their business, but they will likely require more bending backwards to get there.
“I’d be surprised if the SEC didn’t come out with more than the usual compliance programs and independent monitors,” said Velikonja. “I’d be very curious to see if instead, it is something new and more invasive than in the past.”
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