Regulators are asking JPMorgan Chase for information about certain practices in the bank's securities arm and its trading operations, the bank disclosed in a regulatory filing.
The Securities and Exchange Commission is investigating specific practices at JPMorgan Securities, including the discounting of advisory fees, the selecting of portfolio managers and the aggregating of customer accounts for billing. A separate SEC inquiry is looking for answers about the timing of the bank's liquidation of certain shares distributed to investment vehicles, JPMorgan said in the filing.
JPMorgan said that it is cooperating with the SEC in connection to both of those inquiries.
Additional inquiries into the $3.9 trillion-asset bank's trading operations by at least one unspecified U.S. regulator could result in a civil monetary penalty, JPMorgan said. Those investigations center around the bank's trading venues — the platforms the bank operates to facilitate asset trading. JPMorgan said the government has also asked about how the bank ensures the completeness of "certain data fed to trade surveillance platforms."
The bank "is cooperating with these inquiries, has taken corrective actions and is committed to taking appropriate steps to remedy the deficiencies identified," the company said in its report for the third quarter.
JPMorgan also disclosed that it "is currently engaged in resolution discussions" with regulators in connection with the trading inquiries, "and is considering potential implications of those resolutions." It cautioned that there is no assurance that a resolution will be reached.
JPMorgan's quarterly report for the second quarter makes no mention of either the securities inquiries or the trading investigations. The bank did not respond to a request for comment on the disclosures.
In 2020, JPMorgan agreed to pay $920 million to resolve inquiries into its alleged unlawful trading in the U.S. Treasury futures and precious metals futures markets. The steep fine reflected the "nature and seriousness of the bank's offenses," said Brian Rabbitt, then the acting assistant attorney in the Department of Justice's Criminal Division.
The bank's markets arm, which includes much of its trading operations, brought in $6.6 billion worth of revenue in the third quarter. That was down about 3% from the prior year.
"We're encouraged by the level of capital markets activity in September, and we have a healthy pipeline going into the fourth quarter," JPMorgan Chief Financial Officer Jeremy Barnum said on a call with analysts earlier this month.
JPMorgan's shares fell briefly after the investigations were made public on Wednesday. The bank's stock price recovered quickly and closed up 1.8% on Thursday.
JPMorgan is one of the few banks with a stock price that is up year-to-date. Shares of the bank have climbed more than 5% since the beginning of the year, compared with a decline of nearly 24% for the KBW Banking Index, which tracks stock prices of 24 leading U.S. banks.
