Zamansky LLC announces that it is investigating JP Morgan Chase & Co. (”JP Morgan”)(NYSE: JPM) over its sales of proprietary mutual funds and Chase Strategic Portfolios to customers. The investigation concerns JP Morgan’s sales of lower performing higher fee mutual funds to customers, rather than better performing alternatives from competitors, and sales of JP Morgan mutal funds to former Washington Mutual mutual fund holders. We are also reviewing sales by JP Morgan to its brokerage and bank customers of its Chase Strategic Portfolios, a portfolio platform with 15 mutual funds, through inaccurate marketing of fund performance.
In March 2012, it was publicly reported that JP Morgan was ordered to pay $373 million in an arbitration award for favoring its products, despite an agreement to sell alternatives from American Century. On July 3, 2012, The New York Timesreported that JP Morgan encouraged its financial advisers, at times, to favor JPMorgan’s own products even when competitors had better-performing or cheaper options. With one crucial offering, the bank exaggerated the returns of what it was selling in marketing materials, according to JP Morgan documents reviewed by The New York Times.
Even while investors have been pulling money from stock funds, JP Morgan is gathering assets in its stock funds at a rapid rate, despite having only a small group of top-performing mutual funds that are run by portfolio managers. Over the last three years, roughly 42 percent of its funds failed to beat the average performance of funds that make similar investments, according to Morningstar, a fund researcher. “I was selling JPMorgan funds that often had weak performance records, and I was doing it for no other reason than to enrich the firm,” said Geoffrey Tomes, who left JPMorgan last year and is now an adviser at Urso Investment Management. “I couldn’t call myself objective.”
In particular, the investigation is focused on former Washington Mutual mutual fund owners who were sold JP Morgan mutual funds. In 2008, after JP Morgan acquired WaMu, there may have been pressure on the firm’s financial advisors to sell or “switch” customers out of WaMu mutual funds and into JP Morgan funds. This investigation concerns improper mutual fund ”switching” experienced by investors.
JP Morgan has also been “pushing” its Chase Strategic Portfolio, an investment product with 15 mutual funds most of which are proprietary. It is intended to offer ordinary investors holdings in stocks and bonds, with six main models that vary the level of risk. Within four years, the Chase Strategic Portfolio has grown to roughly $20 billion in assets, according to internal documents reviewed by The New York Times. JP Morgan charges investors management fees of 1.6%, which is on top of the fees charged by the mutual funds. Other firms waive fees when selling proprietary mutual funds in wrap account programs. According to The New York Times, JP Morgan also provided investors with marketing materials which contained inaccurate “theoretical” returns for the Chase Strategic Portfolios, which over-stated their actual performance.
*** View Video of Jake Zamansky on CNBC discussing JP Morgan Chase’s “London Whale” trading losses and the bank’s potential liability for its disclosures on this subject
If you are an investor in JP Morgan proprietary mutual funds or the Chase Strategic Portfolio, who wishes an evaluation of your rights, please contact Jake Zamansky by telephone at (212) 742-1414 or by email firstname.lastname@example.org.
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