A lawsuit has been filed against JPMorgan Chase and its subsidiary J.P. Morgan Securities over allegations the firm is shortchanging investors on interest payments, according to Wealth Management.
The proposed class action suit was filed last week in New York’s Southern District by Illinois resident Dan Bodea, who alleges that J.P. Morgan has been sweeping customers’ uninvested cash into accounts with “unreasonably” low interest rates. The firm is accused of breaching its fiduciary duty to customers in its cash sweep program by not paying them sufficient interest on their deposits.
Bodea contends that some of the extra cash in his account was automatically transferred into an interest-bearing bank account at JPMorgan Chase Bank with low rates. At the same time the firm was reaping “outsized benefits for itself” while presenting itself as clients’ fiduciary, the lawsuit claims.
The suit seeks unspecified compensatory and punitive damages for JPMorgan’s alleged breaches of fiduciary duty, gross negligence and unjust enrichment. This follows similar lawsuits against banks and brokerages, including Wells Fargo, Ameriprise, and UBS.
Bodea asserts JPMorgan violated its responsibility by shortchanging client accounts that “receive only a minimal return on their cash deposits,” as well as concealing these benefits from clients through employing “inaccurate, misleading or oblique disclosures.” He said that J.P. Morgan Securities defined itself as acting as his “exclusive custodian and agent.”
Bodea says JPMorgan’s customer agreement acknowledges its role as a customer agent and thus has a duty to serve the customers’ interests instead of its own. The lawsuit alleges the bank “failed to adequately, if at all, disclose to its customers that, as to the bank deposit sweep program it was an agent serving two masters. Those masters are its customers and affiliated companies,” including JPMorgan Chase and JPMorgan Securities LLC.
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