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Rating:A Conviction Could Force J.P. Morgan Out of the Fund Biz Not Rated 0.0 Email Routing List Email & Route  Print Print
Monday, October 28, 2013

A Conviction Could Force J.P. Morgan Out of the Fund Biz

News summary by MFWire's editors

When it rains, it pours.

As if Jamie Dimon didn't have enough headaches, securities legal expert Edward Siedle writes in Forbes that J.P. Morgan Funds could be deported from '40 Act Country if its parents were to be convicted.

Why? Siedle points to a little-known provision of the '40 Act, Section 9 or“Ineligibility of Certain Affiliated Persons and Underwriters,” which states that a person convicted of a felony or misdemeanor related to securities or mutual funds is ineligible to serve as an investment advisor to a mutual fund.

In the article, Siedle notes the dilemma faced by E.F. Hutton pled guilty to “check-kiting” in the mid-1980s, which is a felony. The firm was no longer able to manage its own funds without a special dispensation from the SEC. The firm was able to get one, but its days in mutual fund land were numbered.

Goldman Sachs faced similar peril in May 2010 when it was involved in a settlement with the SEC involving the word fraud, which required the firm's two asset management units, Goldman Sachs Asset Management, and Goldman Sachs Asset Management International, to receive special dispensation from the SEC to remain in '40 Act Country. Neither of these arms had been named in the Goldman settlement.

This situation could be another factor in Dimon's deliberations should he ever consider selling off his company's fund business.  

Edited by: Tommy Fernandez


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