The brokerage business was found to have engaged in false and deceptive conduct from 2009 to 2012. It made false statements on its private banking website and in marketing materials that advisors are compensated "based on our clients’ performance; no one is paid on commission."
However, an SEC investigation found that registered representatives were compensated not based on client performance, but paid a salary and a discretionary bonus.
SEC enforcement division director Andrew J. Ceresney said: "JPMS misled customers into believing their brokers had skin in the game and were being compensated based on the success of customer portfolios.
"But none of the factors JPMS used to determine broker compensation was tied to portfolio performance."
The SEC said that JPMS made false claims on marketing materials including prospecting card, a pitch book, and a marketing letter.
SEC Miami regional office director Eric I. Bustillo said: "Broker-dealers like JPMS have self-interest in representing that their monetary interests are aligned with their customers. JPMS misled customers by falsely claiming that the compensation of its registered representatives was tied to the success of the client’s portfolio."
JPMS’ employees identified the misstatement as inaccurate in four instances from March 2009 to February 2011, but the firm failed to correct the inaccurate broker compensation statement until May 2012.
Additionally, JPMS agreed to be censured and cease and desist from committing or causing any violations and any such future violations.
Image: US Security and Exchange Commission office. Photo: courtesy of WPPilot / Wikipedia.
