The Securities and Exchange Commission (SEC) announced that JPMorgan Securities LLC (JPMS) has settled charges of obstructing advisory and brokerage clients from reporting potential securities violations.。As part of the settlement, JPMS agreed to pay $18 million in civil penalties.。

Coercive customers into silence with confidentiality agreements

According to the SEC's order, JPMS required retail customers to sign confidentiality disclaimers between March 2020 and July 2023.。These agreements are presented to customers who have received more than $1,000 in credit or settlement from the Company。The terms of the agreement require the customer to keep confidential the settlement, basic facts and information related to the relevant account.。Importantly, while the agreement allows customers to respond to SEC inquiries, it expressly prohibits customers from actively contacting the SEC。

SEC Enforcement Director Gurbir S.Grewal stressed that the inclusion of a provision preventing individuals from reporting wrongdoing to the SEC was illegal.。For several years, Grewal noted, it forced some customers to choose between obtaining settlements or credit from the company and reporting potential securities law violations to the SEC.。This either-or claim not only undermines important investor protections, puts investors at risk, but is illegal.。

Corey Schuster, co-head of the Enforcement Asset Management Unit, stressed the importance of ensuring confidentiality agreements do not get in the way of potential whistleblowers。Schuster noted, "Investors, whether retail or otherwise, must report complaints to the Securities and Exchange Commission without interference.。"

The SEC order found that JPMS violated rules under the Securities Exchange Act of 1934, a whistleblower protection rule that prohibits individuals from being prevented from communicating directly with SEC staff about potential securities law violations.。Without admitting or denying the findings, JPMS agreed to accept a reprimand, cease and desist from violating whistleblower protection rules, and pay a civil penalty of $18 million.。

SEC Alleges Identity Theft Program Mistakes

In 2022, the SEC reportedly filed charges against JPMorgan Chase & Co., UBS Financial Services and TradeStation Securities and settled for failures in their identity theft prevention programs.。The broker-dealers neither admitted nor denied the charges, but were charged with violating the Identity Theft Red Flags Rule.。

The companies penalized under the cease-and-desist order failed to implement reasonable policies and procedures to detect identity theft between January 2017 and October 2019.。JPMorgan faces $1.2 million fine, UBS 92.$50,000 fine, TradeStation faces 42.$50,000 fine。The SEC also highlighted deficiencies in oversight, staff training and program updates, highlighting the need for enhanced customer protection.。