JPM JP Morgan Chase and Co

By Emily Glazer And Jean Eaglesham 

J.P. Morgan Chase & Co. is in advanced talks with the Securities and Exchange Commission to pay more than $150 million to resolve allegations it inappropriately steered private-banking clients to its own investment products without proper disclosures, people familiar with the matter said.

The settlement could be announced within the next few weeks, these people added.

SEC investigators have been examining whether J.P. Morgan bankers guided clients too often to the bank's own so-called proprietary investment products, and away from those offered by other firms, these people said.

Moving clients into a bank's own products, while not against the rules, generally leads to higher fees for the bank. The civil inquiry by the SEC's enforcement division started at least a year ago and has moved alongside queries launched by the Office of the Comptroller of the Currency.

Though the potential penalty is a fraction of the billions of dollars J.P. Morgan and other U.S. banks have paid in mortgage-related fines, it hits a wealth-management business that has grown in importance on Wall Street due to its ability to generate reliable fees without eating through lots of capital.

J.P. Morgan has said in regulatory filings that it has received information requests, subpoenas and other inquiries from the SEC and other government authorities regarding client disclosure and possible conflicts of interest in the bank's sales of proprietary products, including its mutual funds in the wealth management business.

The bank has said it is responding to and cooperating with the relevant authorities.

It added in its most recent quarterly filing that regulators are focusing on its U.S. private bank's "disclosures concerning the use of hedge funds that pay placement agent fees to J.P. Morgan Chase broker-dealer affiliates."

Regulators including the SEC have long monitored whether brokers sell their clients the right product for them, or push the ones that make their firm the most money.

The state of Indiana's Securities Division is also in the midst of conducting its own investigation into J.P. Morgan's investment advice, meeting over the past few months with a number of former employees and asking about J.P. Morgan's so-called suitability standards, people familiar with the investigation said.

Financial advisers can operate under different rules depending on whether they register as an investment adviser with the SEC. If they do, they must adhere to a fiduciary standard requiring them to recommend only those investment products that are in the best interests of their clients. Others generally adhere to a different standard that allows them to recommend products that are merely suitable for the client.

Write to Emily Glazer at emily.glazer@wsj.com and Jean Eaglesham at jean.eaglesham@wsj.com

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(END) Dow Jones Newswires

August 18, 2015 15:42 ET (19:42 GMT)

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