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In a quarterly document filed with the Securities and Exchange Commission (SEC), JPMorgan Chase & Co. (NYSE: JPM ) provided updates on its previously disclosed investigations as well as new probes. The company disclosed a new inquiry from the SEC and other government authorities over the sale and use of proprietary products such as JPMorgan mutual funds in the company’s wealth management businesses. JPM has received subpoenas and inquiries from the SEC and other regulators investigating how the banking behemoth sells its own mutual funds and other products. The company stated in the filing that it is cooperating with the concerned authorities. The SEC Investigation The SEC’s enforcement division is investigating if JPMorgan and brokerages offered bonuses and incentives to financial advisers to convince clients to buy in-house funds, structured notes and other investments which earned the bank fees. Bloomberg had reported this in March. “The SEC is scrutinizing, among other things, how the largest U.S. bank by assets managed pensions and other accounts that hold it to a so-called fiduciary standard, which obligates it to put clients’ financial interests ahead of its own,” reported Bloomberg in March. Reportedly, the SEC is looking into if JPMorgan had breached the bank’s duties to clients and if the bank adequately disclosed its compensation and other practices to the clients. The probe into a possible conflict of interest has been running for two years, but has become active now. According to sources, the Office of the Comptroller of the Currency is assisting the probe. Wendel Investissement Investigation Separately, JPMorgan provided an update about the Wendel Investissement ( OTC:WNDLF ) investigation, which has been underway since 2012. The company stated that it received a notification last month about the initiation of a formal probe against it by French authorities. Senior managers of Wendel restructured their shareholdings during the period from 2004 through 2007, with financing for certain transactions provided by the Paris branch of JPMorgan. The French criminal authorities have been investigating this case. White House Warns of Backdoor Payments This comes at a time when the Obama administration is serious about cracking down on the unfair practices that many Wall Street firms are engaged in when they advise retirement investors. The Wall Street firms are accused of deriving benefits via backdoor payments and hidden fees. The Labor Department has announced a proposal, which would require brokers to have a legal duty to prioritize clients’ interests. The protection is believed will save $40 billion in fees over 10 years. According to the Bloomberg, “Brokers could earn sales commissions and other fees that create conflicts of interest if they sign a “best-interest” contract with investors,” said Labor Secretary Thomas Perez. JPMorgan’s Stance In a 2015 disclosure statement for endowment and foundation clients, JPMorgan stated: We prefer internally managed strategies because they generally align well with our forward-looking views and our familiarity with the investment process, as well as the risk and compliance philosophy that comes from being part of the same firm…It is important to note that J.P. Morgan receives more overall fees when internally managed strategies are included. JPMorgan’s asset-management unit has expanded though its other major banks face regulatory pressure. JPMorgan enjoyed the best percentage growth in asset inflows in the five years ending 2014. A February presentation to investors noted JPMorgan had $1.7 trillion in assets under management at the end of 2014. The asset-management unit was structured by expanding JPMorgan’s mutual fund operation. On the other hand, major banks like Morgan Stanley, Citigroup Inc. and Bank of America Corp. have trimmed their mutual fund businesses over the last 10 years, notes Bloomberg. 5 Safe JPMorgan Funds to Own Investors need not be jittery right away due to the ongoing investigations. If a JPMorgan fund has been performing well and returning handsome gains then investors may stay invested. Also, funds with low expense ratio and favorable Zacks Mutual Fund Rank should continue to be potential investment instruments. Here we will list 5 mutual funds from the JPMorgan fund family that carry a Zacks Mutual Fund Rank #1 (Strong Buy) or Zacks Mutual Fund Rank #2 (Buy) as we expect the funds to outperform its peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but the likely future success of the fund. These funds also have encouraging 1 year and 3-year annualized returns. These funds carry no sales load and have low expense ratios. The management fee for these funds is less than 1%. The management fee is the annual percentage of fund assets paid to the fund’s investment manager as compensation for managing the fund. Often this fee is graded; that is, the percentage fee is reduced in steps on assets in excess of various breakpoints. Generally, the management fee will not exceed 1% of total net assets. JPMorgan Intrepid America R5 (MUTF: JIARX ) seeks capital appreciation over the long term. It invests a majority of its assets plus borrowings in large and mid cap domestic firms. While the mid-cap firms have market capitalization between $1 billion and $10 billion, the market cap for large cap firms are over $10 billion. JPMorgan Intrepid America R5 carries a Zacks Mutual Fund Rank #1 (Strong Buy). JIARX has returned 14.8% and 20% over the last 1 and 3-year periods. The annual expense ratio is 0.58%, lower than the category average of 1.08%. The 10-year expense projection for every $10,000 invested is $689, compared to category average of $1,641. JPMorgan Large Cap Value R5 (MUTF: JLVRX ) invests majority of its assets in large-cap companies. JLVRX invests in equities, including common stocks and also debt and preferred stocks that can be converted to common stock. These large-cap firms have market capitalization equal to the ones listed on the Russell 1000 Value Index. JPMorgan Large Cap Value R5 currently carries a Zacks Mutual Fund Rank #2 (Buy). JLVRX has returned 12.1% and 19.9% over the last 1 and 3-year periods. The annual expense ratio is 0.57%, lower than the category average of 1.13%. The 10-year expense projection for every $10,000 invested is $726, compared to category average of $1,627. JPMorgan US Equity R5 (MUTF: JUSRX ) aims to provide high total return. JUSRX invests a lion’s share of its assets in domestic companies. JUSRX mostly invests in common stocks of mid to large-cap domestic firms. It may also invest a maximum of 20% of its assets in foreign companies. JPMorgan US Equity R5 currently carries a Zacks Mutual Fund Rank #2 (Buy). JUSRX has returned 14.3% and 19.5% over the last 1 and 3-year periods. The annual expense ratio is 0.59%, lower than the category average of 1.08%. The 10-year expense projection for every $10,000 invested is $735, compared to category average of $1,641. JPMorgan Growth Advantage R5 (MUTF: JGVRX ) seeks capital appreciation. JGVRX invests mostly in companies of all market capitalizations. However, at a given time, JPMorgan Growth Advantage R5’s assets may be invested in one particular type of market capitalization. JPMorgan Growth Advantage R5 currently carries a Zacks Mutual Fund Rank #2 (Buy). JGVRX has returned 20.3% and 20.6% over the last 1 and 3-year periods. The annual expense ratio is 0.85%, lower than the category average of 1.19%. The 10-year expense projection for every $10,000 invested is $1,014, compared to category average of $1,670. JPMorgan Realty Income R5 (MUTF: JRIRX ) seeks to provide total return, offering both income and capital growth. JRIRX invests heavily in real estate investment trusts (REITs) and may purchase equity securities of small cap REITs. It may invest in equity as well as mortgage REITs. JPMorgan Realty Income R5 currently carries a Zacks Mutual Fund Rank #1 (Strong Buy). JRIRX has returned 11.5% and 9.9% over the last 1 and 3-year periods. The annual expense ratio is 0.78%, lower than the category average of 1.31%. The 10-year expense projection for every $10,000 invested is $1,114, compared to category average of $1,796. Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks. Scalper1 News
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