JPMorgan Chase faces a new lawsuit alleging the company profited unfairly by paying "shockingly" below-market interest on customers' uninvested cash balances.
Chase and several industry peers, including Wells Fargo, LPL Financial, Morgan Stanley, Ameriprise Financial, Merrill and PNC Financial Services, already were named in multiple proposed class action complaints accusing them of using customers' uninvested brokerage cash balances to enrich themselves at clients' expense.
In a similar suit filed Thursday in U.S. District Court in California, J.P. Morgan Securities customer Jamie Canales alleges the company implemented its cash sweep program in an "exploitative and unfair" manner when it transferred customers' uninvested funds into JPMorgan bank accounts.
"J.P. Morgan Securities placed class members' cash in shockingly low interest-bearing accounts at Its affiliated bank," the lawsuit contends. "Because the bank's accounts pay far below market rates of interest, plaintiff and other class members have lost significant amounts of interest they would have otherwise earned had JP Morgan Securities swept their uninvested cash into bank accounts that pay a market interest rate."
The suit alleges JPMorgan and J.P. Morgan Securities, a registered broker and investment adviser, breached their fiduciary and contractual duties owed to Canales and other similarly situated retirement account investors.
California resident Canales, who maintained a Roth IRA in a self-directed investing account with J.P. Morgan Securities, contends the cash held in his account was automatically "swept" into a low interest-bearing Chase bank account through a sweep program.
Through its relationship with Canales and other customers, J.P. Morgan "assumed fiduciary duties including the duty of loyalty, the duty of care, the duty to act in good faith, the duty of full and fair disclosures, and the duty to make prudent investment recommendations," the lawsuit says, citing the Securities Exchange Act's Regulation Best Interest, or Reg BI.
