JPMorgan Investment Management’s Shareholders Claim The Firm Charged Excessive Mutual Fund Fees

In the US Southern District of Ohio, Eastern Division, JP Morgan (JPM) Investment Management shareholders are claiming that the firm charged them excessive fees in three of its funds:

• JP Morgan Core Bond Fund
• JP Morgan Short Duration Bond Fund
• JP Morgan High Yield Fund

The plaintiffs contend that by charging these higher fees, compared to fees that other fund companies charged, the defendant got up to $108 million more in fees from its management company than if there was no in-house relationship. This allowed JP Morgan to purportedly achieve substantial economies of scale from a growth in assets under management each year. However, contend shareholders, they did not benefit from these savings through reduced fees.

The plaintiffs are claiming fiduciary breach since a board of directors is in charge of oversight of over 160 other JP Morgan Investment funds, as well as service providers, and also the fee arrangements of these providers. The lawsuit also contends that the defendant charged an advisory fee determined by AUM and charged more when administering its own funds as opposed to sub-advised funds. The result was a difference between proprietary and sub-advised fee schedules of about $100 million in profits to JP Morgan.

They also say that the board did not seek competitive bidding for offering similar advisory services nor did it try to obtain a “most favored nation” provision that would have pushed for fee parity between the subadvised funds and the JP Morgan managed ones. The board is also accused of knowingly approving the higher fees.

The shareholders say that not only were they charged larger fees but also they did not get an increase in services for paying more. The plaintiffs want these fees back, as well as lost profits and other actual damages.

More Blog Posts:
JPMorgan Will Pay $614M to US Government Over Mortgage Fraud Lawsuit, Stockbroker Fraud Blog, February 8, 2014

JP Morgan VP Barred from Securities Industry By FINRA for Insider Trading Scam, Stockbroker Fraud Blog, January 25, 2014

$13B MBS Fraud Settlement Between JPMorgan and the US is Under Dispute in New Securities Lawsuit, Institutional Investor Securities Blog, February 10, 2014