In yet another addition to the endless regulatory headwinds for
JPMorgan Chase & Co.
), the Securities and Exchange Commission (SEC) is conducting a
probe into the potential conflict of interests in its private
banking division. The news was first reported by the
Wall Street Journal
The SEC is investigating whether JPMorgan's sale of its in-house
investment products to the private-banking clients has been
inappropriately administered. This inquiry runs parallel to the one
launched by the Office of the Comptroller of the Currency (OCC)
several months ago.
Notably, although not confirmed whether the OCC probe is still on
the run, yet it has prompted JPMorgan to offer improved investment
disclosures to its private-banking clients.
Generally, banks can generate more fee income from selling in-house
financial products to its private-banking clients. The SEC's
inquiry deals with how investment advisors of JPMorgan recommended
investment products to their clients.
In case the investment advisors are registered with the SEC, they
have to adhere to the fiduciary standard that requires them to
recommend only those financial products that serves the best
interests of the clients. Most investment specialists working with
JPMorgan are bound by this fiduciary standard.
As of Jun 30, 2014, JPMorgan's private banking unit had $383
billion of assets under management. The unit, with $10 million or
more in investible assets, caters to the private-banking clients.
We believe that the ongoing inquiry will likely further enhance the
disclosure standard at JPMorgan. This will surely aid
private-banking clients to make more informed investment decisions.
JPMorgan currently carries a Zacks Rank #3 (Hold). Some
better-ranked finance stocks include City National Corp. (
), BofI Holding, Inc. (
) and Popular, Inc. (
). All these stocks hold a Zacks Rank #2 (Buy).
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