Additional Fees

The emphasis on selling was reinforced by the pay structure, which consisted of a salary and annual bonus. Five of the former bankers described the three factors listed in the pay scorecard to determine compensation -- new clients, new bank revenues and a measure of asset flows, which they said was defined as JPMorgan products such as bank loans or in-house investment funds as well as products from other firms that share fees with the bank.

Those measures were included on the compensation scorecard reviewed by Bloomberg, which also included a category called “cross-selling.”

There are cases where cross-selling by investment advisers could run afoul of regulators. Advisers who manage trusts and discretionary trading accounts generally have a fiduciary duty to prioritize the client’s interest over the bank’s. Excessive sales of in-house investments tied to those assets could raise the alarm of the government overseers reviewing the banks’ practices. JPMorgan doesn’t report how much of the $433 billion managed by the private bank is subject to fiduciary requirements.

OCC Warning

In 2012, a review of JPMorgan by the OCC, which wasn’t made public, warned the bank that its cross-selling practices for pension funds violated the clients-first requirement, a person familiar with the matter has said. JPMorgan declined to comment on the warning.

U.S. securities regulators have also examined the cross-selling activities of JPMorgan’s asset-management business. They found that the bank had violated securities regulations by failing to tell investors that it favored its own products over others. To resolve the matter, in December 2015 the bank paid a record $307 million asset-management settlement to the SEC and the Commodity Futures Trading Commission. The bank admitted disclosure lapses and agreed to provide more transparency.

The next month, JPMorgan’s private bank settled regulatory claims that it had misled clients by telling them it paid advisers “based on clients’ performance” when, in fact, it considered other factors. The bank didn’t admit or deny wrongdoing.

Fine Print

Disclosure goes only so far, said Philip Aidikoff, a securities lawyer in Beverly Hills, California, who’s representing a client in an arbitration against JPMorgan over an alleged breach of fiduciary duty, the details of which aren’t public. “Clients shouldn’t have to worry that their bank can screw them because somewhere in a large offering document it says the bank can screw them,” he said.