J.P. Morgan Chase executives have been deposed and thousands of pages of internal documents subpoenaed as part of a U.S. investigation into the bank's asset management unit, according to people familiar with the situation.
The Securities and Exchange Commission's enforcement division is looking at whether senior asset management executives at the bank developed a policy of improperly steering clients into investments for J.P. Morgan's own financial gain, these people said. The SEC is scrutinizing, among other things, how the largest U.S. bank by assets managed pension plans and other accounts that hold it to a so-called fiduciary standard, which obligates it to put clients' financial interests ahead of its own.
The SEC's investigation into potential conflicts of interest at J.P. Morgan, a probe that began roughly two years ago, has become more active in recent months, the people said. It is being assisted by the Office of the Comptroller of the Currency, which oversees national banks, according to another person who was briefed on the matter.
Darin Oduyoye, a spokesman for New York-based J.P. Morgan, declined to comment. The SEC declined to comment through spokeswoman Florence Harmon, a spokeswoman.
The SEC is looking into whether the bank and its brokerage affiliate, J.P. Morgan Securities, adopted a strategy that uses bonuses and other incentives to encourage their financial advisers to steer clients improperly into in-house funds, structured notes and other investments that generate fees for the bank, the people familiar with the matter said.
For at least a few years, an approach to steer clients toward funds that are lucrative to the bank has been referred to internally as “guided architecture,” according to a former employee who worked with retirement plans.
J.P. Morgan, in a 2015 disclosure statement for endowment and foundation clients, said it rigorously reviews internal and external investment options but prefers in-house products unless it believes others can give a portfolio substantial benefits not offered by its own funds.
J.P. Morgan Asset Management had the highest percentage growth in asset inflows of any large manager in the five years through 2014, ending the period with $1.7 trillion in assets under management.
