Products Available for Brokerage Accounts

This section is intended to provide you with a general description of the various products available within a brokerage account. Before making any investment, each client should evaluate if the product is suitable for their needs and financial situations, and their ability to take on risks.

As a reminder, while we will take reasonable care in developing and making recommendations to you, securities and investment products involve risk, and you may lose money. There is no guarantee that you will meet your investment goals, or that our recommended investment strategy will perform as anticipated. Please consult available offering documents for any security we recommend for a discussion of risks associated with the product. We can provide these documents to you, or help you to find them.

Equities/Stocks

Description:

What is a stock?

  • Stocks represent an ownership interest in a company. When you own a company’s stock, you can have an equity interest in the company, or own a fractional portion of the company. 
  • A stockholder can achieve returns through price appreciation/ depreciation and dividends.
  • A stock’s market value can change at any moment, depending on market conditions, investor perceptions, or a host of other issues.
  • Owning stock typically gives you the right to vote on important company issues and policies.
  •  Stockholders have a claim on a company’s assets if the company goes bankrupt. However, in the event of liquidation, stockholders will receive what is left after all of the company’s creditors have been paid.

There are different types of stocks:

  • Listed Common stock - a stock that is made available by public companies to the public for purchase, (typically through an initial public offering, or IPO), and may also refer to the secondary trading of these shares.
  • Preferred stock – stock that entitles the holder to a fixed dividend, whose payment takes priority over that of common stock dividends.
  • Restricted Stock – shares in a company issued in private transactions (e.g., to employees as part of their pay), but which cannot be transferred by them until certain conditions have been met.

In addition to exchange-traded securities, we offer equities in the following ways: 

  • Equity1 - We may participate in Initial Public Offering (IPO), which is the first sale of shares of a company to the public. 
  • Secondary Offering – We also may participate in a Secondary Offering, which is the sale of additional shares of a company immediately following an IPO (already trading in public market).

Fees:

As mentioned above, you pay JPMS a commission for each equity transaction, as follows: 

 

Principal Money Base Charge % of Notional

Lot Charge (0-10)

Lot Charge (10+)

Max Commission
Up to $20,000 N/A 2.00% N/A 2.00%
$20,000 to $99,999 N/A 1.50% N/A 1.50%
$100,000 to $499,999 N/A 1.25% N/A 1.25%
$500,000 to $999,999 N/A 1.00% N/A 1.00%
$1,000,000+ N/A 0.75% N/A 0.75%

 

  • Minimum and Maximum Commissions for Equity Transactions
    • Minimum: $25 on trades with a notional value >$100
    • Maximum: 2% with the exception of $25 minimum on trades
    • Any trades priced at zero will remain at zero

Risks and other Relevant Information

An investment in stocks involves a number of risks. The following discussion is not meant to be exhaustive and the risks discussed do not comprise a complete list of all the risks relating to stocks. You should consider these risks as you choose your investments. 

  • The price of stocks may rise or fall because of changes in the broad market or a company’s financial condition, or industry–specific risks, sometimes rapidly or unpredictably. 
  • If a company becomes insolvent, its stocks are repaid only after all other debts of the company have been repaid. This can result in a potentially severe reduction in, or total loss of, their value. 
  • Some securities trade less frequently and in smaller volumes, often stocks of smaller or newer companies. In addition, smaller or newer companies may be more vulnerable to economic, market and industry changes, and thus can be riskier.
  • Stocks may not be registered, publicly listed or traded on an exchange, and these securities are more likely to be illiquid and therefore subject to a higher degree of liquidity risk than registered or listed securities. 
  • Issuers typically compensate JPMS for the distribution of new issues of securities. Similar to other products, compensation JPMS receives may be allocated as revenue to JPMS.

Resource(s) to Obtain Additional Information:

Please consult available offering documents for any security we recommend for a discussion of risks associated with the product. We can provide these documents to you, or help you to find them. 

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Fixed Income Bonds

Description:

  • Bonds are debt securities of an issuer. By buying a bond, the bondholder extends a loan to the bond issuer. In return, the bond issuer promises to pay the bondholder interest periodically, and principal at maturity.
  • Fixed income securities generally provide investors with a steady stream of income, creating a consistent cash flow to investors. An investor can also use fixed income to achieve returns through price appreciation/depreciation.
  • The biggest risks of bonds and other fixed income investments include interest rate risk, credit risk and inflation risk, as described further below.
  • There are different types of fixed income products. The following is an illustrative list of some, but not all, of the bonds available to investors. 
    • Government bonds are debt issued by a federal government to support government spending. Government bonds can pay periodic interest payments called coupon payments. Government bonds are generally considered low–risk investments since the issuing government backs them. Examples include U.S. Treasuries, Japanese Government Bonds and UK Government Bonds.
    • Municipal bonds are loans investors make to local and state governments. They are issued by cities, states, counties or other local governments. Municipal bonds are generally exempt from federal taxation.
    • Agency bonds are bonds issued by a government agency. These bonds do not include those issued by the U.S. Treasury or municipalities and are not fully guaranteed in the same way as U.S. Treasuries. Agency bonds are also known as agency debt.
    • Corporate bonds are debt obligations issued by corporations to fund capital improvements, expansions, debt refinancing, share buybacks or acquisitions. Interest is subject to federal, state and local taxes.
      • Investment grade corporate bonds are typically issued by high–quality corporations, those with credit ratings between AAA and BBB-.
      • High Yield corporate bonds have a higher risk of default or other adverse credit event, but typically pay higher interest rates than higher-rated bonds in order to make them attractive to investors. These bonds are typically less liquid.
    • Emerging market debt is a term used to encompass bonds issued by less developed countries. It does not include borrowing from governments, supranational organizations such as the IMF or private sources, although loans that are securitized and issued to the markets can be included.
    • Brokered CDs are certificates of deposit sold by an intermediary, called a broker. Financial institutions use brokers to market their CDs to help them gain deposits. The rates on brokered CDs tend to be very competitive because the financial institution is competing directly with other institutions for deposits.
  • In addition to exchange-traded securities, we may offer new bond issuance/syndicate, which are bond securities that have been registered, issued and are being sold on a market to the public for the first time.1

Fees:

As noted above, JPMS charges a mark–up/mark–down for bond transactions. A mark–up is the difference between a security’s lowest current offering price and the price charged to the client, while a mark–down is the difference between the highest current bid price for a security and the lower price that a client receives when selling a bond.

Asset Class ($/Bond) Maximum Mark-Up
High Grade 20.00
High Yield 25.00
Treasury Bills 0.50
Treasury Notes/Bonds 6.25
Municpal Bonds 25.00

 

Risks and other Relevant Information:

Although fixed income investments are generally perceived to be more conservative than stocks, they are not without risk. Below are some of the major risks associated with the fixed income securities.

  • Bond prices rise when interest rates fall and vice versa. Longer-term securities are more prone to price fluctuation than shorter-term securities. Any fixed income security sold or redeemed prior to maturity may be subject to substantial gain or loss. Income is subject to the credit risk of the issuer of the bond. If an issuer defaults no future income payments will be made.
  • Credit risk is the risk that the issuer of a security may not honor its obligation to pay principal or interest, resulting in a loss to the investor. You should consider the credit risk of an issuer when making an investment decision.
  • There are many fixed income products with different degrees of liquidity. There may be no market for a particular fixed income instrument, and you may not be able to sell the security at the desired time or price. Even when a market exists, there may be a substantial difference between the secondary market bid and ask price for a fixed income instrument. Even when a market exists, there may be a substantial credit spread, which is the difference in yield between two fixed income instruments that have similar maturity but different credit quality. For example, if a 10-year U.S. Treasury note has a yield of 4% and a corporate bond has a yield of 7%, the spread would be (7-4)*100 = 300 basis points.
  • The value of fixed income instruments generally moves in the opposite direction of credit spreads. Values decrease when credit spreads widen, and increase when credit spreads narrow.
  • Interest rate (or duration) risk is the risk that changes in prevailing market interest rates will affect the value of a fixed income security. The value of a fixed income security will generally move in the opposite direction of interest rates. Values decrease when interest rates rise, and increase when interest rates fall.
  • A callable bond permits the issuer to redeem the bonds before the maturity date. Investors in callable bonds may not receive the bond's original coupon rate for the entire term of the bond, and once the call date has been reached the market value of the bond may be capped at the call price.
  • U.S. government securities are issued directly by the U.S. government and are guaranteed by the U.S. Treasury; however, other U.S. government securities issued by an agency of the U.S. government may not carry such a guaranty. The U.S. government may not provide financial support to its agencies if not required to do so by federal law. Similar risks apply to securities issued by state government agencies and municipalities.
  • Many of the risks in fixed income securities apply to other investments as well. For instance, inflation risk (the risk that returns will not keep pace with inflation) affects every investment. Foreign investments also have currency risk (the risk that currency exchange rate fluctuations may reduce gains or increase losses on foreign investments). Exchange rate volatility also may affect the ability of an issuer to repay its foreign currency denominated debt, thereby increasing credit risk. 
  • Issuers typically compensate JPMS for the distribution of new issues of securities. Similar to other products, compensation JPMS receives may be allocated as revenue to JPMS.

Resource(s) to Obtain Additional Information:

Please consult available offering documents for any security we recommend for a discussion of risks associated with the product. We can provide these documents to you, or help you to find them.

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Structured Investments

Description:

  • Structured Investments (or “Structured Products”), in general terms, are fixed tenor securities that establish payoff profiles and detail potential benefits and risks linked to market outcomes. The underlying reference assets may include single equity or debt securities, indexes, commodities, interest rates and/or foreign currencies, as well as baskets of these reference assets or market measures.
  • Structured Products typically have two underlying component parts — a note and a derivative, which is often an option. The note, in some instances, may pay interest, or a coupon rate, at a specified rate and interval. (See Section 3.F for further information about derivatives.)
  • When packaged into a single security, the components of a Structured Product have the ability to adjust the underlying reference asset’s overall risk and return profile.
  • Potential investors should consider whether to invest in Structured Products in light of their own circumstances, investment objectives, tax position and financial condition. Structured Products will be offered by prospectus, term sheet or offering memorandum, and the offering document will provide more detailed information regarding the Structures. Potential investors should consider carefully all the information and risk factors set forth in the term sheet or Pricing Supplement along with all the information set forth in the Offering Memorandum.

Fees:

  • J.P. Morgan is typically paid a distribution fee of up to 3% of the notional amount of the security. Details on the specific fees and costs associated with each note will be contained in the term sheet for the Structured Product.
  • The issue price of a Structured Product will reflect the costs associated with issuing, selling, structuring and hedging a Structured Product and will include compensation to an issuer or its affiliate for structuring work involved in packaging a Structured Product as one instrument.
  • Costs and compensation will vary with each Structure. A Structured Product may also include an annual fee embedded in an index or calculation, payable to the issuer or index sponsor (which may be J.P. Morgan or a non– J.P. Morgan affiliate issuer) for structuring or calculating a proprietary index or formula.
  • In addition, the issue price of a Structured Product purchased in a brokerage account will include a fee to compensate J.P. Morgan for marketing and distributing the Structured Product.
  • If a Structured Product has an early redemption feature and is redeemed prior to maturity, the compensation will not be prorated to the period during which the Structured Product was outstanding and, as a result, the rate of compensation will be higher.

Restrictions:

  • Issuers – Only Structured Products issued by J.P. Morgan-approved counterparties will be recommended. All approved counterparties are periodically reviewed. 
  • Payoff profiles – Payoff Profiles offered are documented and vetted through appropriate internal approval channels.
  • Paperless delivery – You must be enrolled in paperless delivery of all investor materials to be approved for Structured Products. If we do not have your electronic consent and email address on file, you will not be able to invest in this product.
  • Clients need to meet Suitability criteria to transact in Structured Products.

Risks and other Relevant Information:

  • Investments in Structured Products may not be suitable for all investors. These types of investments entail varying degrees of risk and, while some Structured Products offer full or partial principal protection, others can result in the loss of the full amount invested. In addition, Structured Products are subject to the issuer’s financial ability to meet its payout obligations.
  • Structured Products may not be publicly listed or traded on an exchange and therefore may be illiquid investments.
  • Prior to maturity, Structured Products will generally only be repurchased by the issuer and only upon terms and conditions acceptable to it, and, in most cases, Structured Products are non–transferable and non–negotiable. In the event that an issuer consents to early liquidation, you will likely not fully participate in any benefits of the Structured Product, such as principal protection, buffers or enhanced returns.
  • Investing in a Structured Product is not the same as investing directly in the underlying asset. The return on a Structured Product at maturity may not be the same as the return on a direct investment in the underlying asset, and the maximum payment on a Structured Product may be subject to a cap, which would limit appreciation potential compared to a direct investment. Because the amounts payable with respect to a Structured Product are generally calculated based on the value or level of the underlying asset on a specified date or over a limited period of time, the volatility of the asset increases the risk that the return on the Structured Product may be adversely affected by a fluctuation in the level of the underlying asset. The volatility of an asset, particularly a currency or commodity, may be affected by political or economic events, including governmental actions, or by the activities of participants in the relevant markets.
  • Issuers of Structured Products generally hedge their exposure on the Structured Product. Such hedging may involve the issuer, directly or through its affiliates, entering into transactions involving the securities, commodities or currencies or other instruments underlying the Structured Product, or derivative instruments, such as swaps, options or futures, on the underlying asset. By engaging in transactions of this kind, the issuer could adversely affect the value of a Structured Product and could achieve substantial returns from its hedging transactions, while the value of the Structured Product may decline. Issuers and their affiliates also may engage in trading, including trading for hedging purposes, for their proprietary accounts or for other accounts under their management, in the securities, commodities or currencies or other instruments underlying a Structured Product, or in other derivative instruments related to the underlying asset. These trading activities could adversely affect the value of a Structured Product. The issuer and its affiliates may also introduce competing products into the marketplace and adversely affect the value of a Structured Product thereby.
  • We have a conflict of interest when recommending Structured Products issued by J.P. Morgan affiliates because it increases the overall revenue of J.P. Morgan. 
  • When playing multiple roles and performing duties, JPMS’s and J.P. Morgan’s economic interests and your economic interests in Structured Products potentially could be adverse. It is also possible that JPMS’s or its affiliates' hedging or trading activities in connection with Structured Products could result in substantial returns for JPMS or its affiliates while the value of Structured Products decline.
  • Use of Structured Products may not be suitable for all investors. Neither JPMS nor any of its affiliates render tax or legal advice. Therefore, clients are strongly encouraged to consult with outside tax and legal professionals regarding the potential that the use of Structured Products may generate undesired tax liabilities and penalties.

Resource(s) to Obtain Additional Information:

Please consult available offering documents for any security we recommend for a discussion of risks associated with the Structured Product. We can provide these documents to you, or help you to find them.

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Securitized Products

Description:

Securitized Products are financial products that pool various types of contractual debt such as residential mortgages, commercial mortgages, auto loans or credit card debt obligations (or other non–debt assets which generate receivables) and package the related cash flows to third-party investors as securities, pass–through securities or collateralized debt obligations (CDOs). Holders are repaid from the principal and interest cash flows collected from the underlying debt and redistributed through the capital structure of the new financing. Securities backed by mortgage receivables are called mortgage–backed securities (MBS), while those backed by other types of receivables are asset–backed securities (ABS). 

Fees:

JPMS charges a mark–up/mark–down for Securitized Products transactions. As noted above, a mark–up is the difference between a security’s lowest current offering price and the price charged to the client, while a mark–down is the difference between the highest current bid price for a security and the lower price that a client receives when selling a bond.

Asset Class Minimum Mark-Up Maxinum Mark-Up
U.S. Government Agencies ($/Bond) $0.025 $1.50
Agency Mortgage-Back Securities ($/Bond) $0.063 $.200
Non–Agency High-Grade Mortgage-Backed Securities ($/Bond) $0.063 $2.00

 

Restrictions:

JPMS clients are required to meet certain criteria to transact in these products. 

Risks and other Relevant Information:

  • Risks generally include interest rate risk, basis risk, liquidity risk, prepayment risk and credit risk. While in some transactions the issuer may retain most of the economic credit risk associated with securitized assets, the credit risk of certain asset types may be small compared with these other risks.
  • Default risk is the borrower’s inability to meet interest payment obligations on time. For ABS, default may occur when certain obligations relating to the underlying collateral are not sufficiently met as detailed in its prospectus. A key indicator of a particular security’s default risk is its credit rating. Different tranches within the ABS are rated differently, with senior classes of most issues receiving the highest rating, and subordinated classes receiving correspondingly lower credit ratings. Almost all mortgages, including reverse mortgages, and student loans, are now insured by the government. 
  • Fluctuations in interest rates affect floating rate ABS prices less than fixed rate securities, as the index against which the ABS rate adjusts will reflect interest rate changes in the economy. Interest rate changes may affect the prepayment rates on underlying loans that back some types of ABS, which can affect yields. Home equity loans tend to be the most sensitive to changes in interest rates, while auto loans, student loans, and credit cards are generally less sensitive to interest rate.

Resource(s) to obtain Additional Information:

Please consult available offering documents for any security we recommend for a discussion of risks associated with the product. We can provide these documents to you, or help you to find them.

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Derivatives

Over–the–Counter Derivatives

Description:

  • Over–the–Counter Derivatives take one of four basic forms, although the forms can be overlapping and one transaction can involve elements of all four forms. These basic forms are 1) swaps, 2) options, 3) forwards and 4) hybrid instruments, the latter of which are debt obligations with an embedded swap, option or forward.
  • Derivatives can be settled in cash or settled by physical delivery of property against cash. Derivatives that are regulated by the SEC as securities include (a) non–cleared security–based swaps, (b) any put, call, straddle, option or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), (c) any put, call, straddle, option or privilege entered into on a national securities exchange relating to foreign currency or (d) any warrant or right to subscribe to or purchase, any of the foregoing.
  • Derivatives are typically used for hedging systematic or market risks such as, among other things, currency fluctuations, market movements, interest rate movements or inflation.
  • A common feature of Derivatives is that the obligations of one or both of the parties are based on the value or market price of one or more underlying financial or commodity markets, to which the transaction is linked. You should not enter into an OTC Derivative unless you understand, at a minimum:
    • The fundamentals of the market underlying the Derivative;
    • The legal terms and conditions of the documentation for the Derivative;
    • The extent of the economic risk(s) to which you are exposed as a result of such Derivative (and determine that such risk is suitable for you in light of your financial circumstances and objectives);
    • The tax treatment of the Derivative; and
    • The regulatory treatment of the Derivative.

Fees:

Fees for OTC Derivatives are determined on a contract by contract basis, typically calculated as a percentage of the notional amount of the trade, depending on tenor, notional, asset class and complexity of trade. Details on the fees are contained in the OTC term sheet and confirmation for each trade. 

Restrictions:

  • Restrictions are based on an approved product list
  • Clients need to meet certain criteria to trade
  • Some OTC Derivatives are subject to Dodd–Frank requirements

Risks and other relevant information:  

The following points should be considered in deciding whether to enter into a particular OTC Derivative: 

  • Market risk: To the extent the obligations or rights associated with an OTC Derivative are linked to prices or values in a particular market, you will be exposed to a risk of loss as a result of price or value movements in that market. 
  • Credit risk: You will be dependent upon the financial capacity of J.P. Morgan to meet its obligations under each OTC Derivative contract prior to settlement, and you may incur unsecured credit risk with respect to those obligations.
  • Price transparency: Because the prices and characteristics of non–cleared OTC Derivatives are individually negotiated and there is no central source for obtaining prices, dealers in non–cleared OTC Derivatives may quote different prices for similar transactions. J.P. Morgan does not warrant that its prices will always be the best prices available. 
  • Option risk: Option transactions can be very risky. The risk of selling (writing) options is considerably greater than the risk involved in buying options. If you buy an option, you cannot lose more than the premium. If you sell (write) an option, the risk can be unlimited. Fluctuations in currency exchange rates may affect the value of any OTC Option on securities trading in, or denominated in, a foreign currency, as well as the value of any payment or delivery of securities in connection with such OTC Option. 
  • Leverage risk: Certain derivatives can be structured to allow for significant leverage. The use of leverage may have the effect of magnifying an investor’s losses or gains and can cause an investor to be highly exposed to risk with very little capital or cash investment. As a result, a relatively small, unexpected change in the notional amount of an investor’s position could have a much larger adverse impact on the principal amount invested. 
  • Collateral: Collateral may be required to support your obligations under OTC Derivatives. Additional collateral may be required after you have entered into an OTC Derivative. 

Resource(s) to obtain additional information:

Please consult available offering or transaction documents for any security we recommend for a discussion of risks associated with the product. We can provide these documents to you, or help you to find them.

Listed Options

Description:

  • Listed Options are a type of derivative security traded on an exchange. Specifically, options are contracts that grant the right, but not the obligation, to buy or sell an underlying asset at a set price on or before a certain date.
    • Call Options are financial contracts that give the option buyer the right, but not the obligation, to buy an underlying asset at a specified price within a specific time period. The underlying asset can be a stock, bond or commodity. 
    • Put Options are contracts giving the owner the right, but not the obligation, to sell, or short, a specified amount of an underlying asset at a pre–determined price within a specified timeframe.
  • There are three types of listed options, namely American style, European style and Bermudan style.
    • A European option may only be exercised on expiration.
    • An American option may be exercised on any trading day on or before expiry.
    • A Bermudan option may be exercised only on specified dates on or before expiry. 
  • Uncovered Options 
    • An uncovered (or “naked”) option transaction occurs when an investor buys or sells (writes) an option without owning a position in the underlying asset. There are special risks associated with uncovered option writing that potentially expose the investor to significant loss. Therefore, this type of strategy may not be suitable for all investors, including those generally approved for options transactions. 
    • The potential loss of uncovered call writing is unlimited. The writer of an uncovered call is in an extremely risky position, and may incur large losses if the value of the underlying instrument increases above the exercise price. 

Fees:

Greater than $1 per contract (Single Contract Trade).

Single contract greater than $1

Principal Money Multiplier Add-on Multiplying Adjustment
Up to $2499 0.015 $14.30 1.0969
$2,500 to $4,999 0.0105 $25.55 1.0969
$5,000 + - $77.50 1.0969

 

Multiple contracts greater than $1 (using single contract calculation)

Principal Money Multiplier Add-on Contract Multiplier Multiplying Adjustment
Up to $2499 0.015 $14.30 # of contracts 1.0969
$2,500 to $4,999 0.0105 $25.55 # of contracts 1.0969
$5,000 + - $77.50 # of contracts 1.0969

 

­   Multiple contracts greater than $1 (using multiple contract calculation)

Principal Money Multiplier Add-on Lot Add-On Multiplying Adjustment
Up to $2499 0.015 $14.30 $7 per contract (10 contracts or less) /$5 per contract (11 contracts or more) 1.0969
$2,500 to $4,999 0.0105 $25.55 $7 per contract (10 contracts or less) /$5 per contract (11 contracts or more) 1.0969
$5,000 to $19,999 0.01075 $24.30 $7 per contract (10 contracts or less) /$5 per contract (11 contracts or more) 1.0969
$20,000 0.0075 $89.30 $7 per contract (10 contracts or less) /$5 per contract (11 contracts or more) 1.0969

 

Restrictions:

Listed option exchanges may from time to time restrict the types of transactions that are permitted.

Risks and Other Relevant Information:

  • Options trading involves additional risk, is not suitable for all investors, and is subject to approval. Before buying and selling options, investors should understand all of their rights and obligations associated with trading options. For example, the risk of selling (writing) options is considerably greater than the risk involved in buying options. If you buy an option, you cannot lose more than the premium. If you sell (write) an option, the risk can be unlimited. Fluctuations in currency exchange rates may affect the value of any OTC Option on securities trading in, or denominated in, a foreign currency, as well as the value of any payment or delivery of securities in connection with such OTC Option. 

In addition, options can be structured to allow for significant leverage. The use of leverage may have the effect of magnifying an investor’s losses or gains and can cause an investor to be highly exposed to risk with very little capital or cash investment. As a result, a relatively small, unexpected change in the notional amount of an investor’s position could have a much larger adverse impact on the principal amount invested.

  • JPMS or an affiliate may act as Primary Market Maker or Competitive Market Maker in option trades executed on an options exchange, and may have a position (long or short) in such securities and may be on the opposite side of public orders executed in such securities.

Resource(s) to obtain additional information:

  • Please consult available offering or transaction documents for any security we recommend for a discussion of risks associated with the product. We can provide these documents to you, or help you to find them.
  • Prior to buying or selling an option, investors must read a copy of the Characteristics & Risks of Standardized Options, also known as the options disclosure document issued by the Options Clearing Corporation. It explains the characteristics and risks of exchange-traded options. To view it, go to www.theocc.com/about/publications/character-risks.jsp

Foreign Exchange

Description:

  • A foreign exchange spot transaction involves two parties agreeing to exchange currency at the exchange rate at the time of trade, or “on the spot.” A foreign exchange spot transaction is normally settled within two days.

Fees:

  • Forward2 and spot transactions in foreign exchange are executed by JPMCB and are subject to a mark–up (if you are the buyer) or mark–down (if you are the seller) of up to 2.00% of the notional amount per transaction. 

Risks and other relevant information:

Foreign currencies or baskets of currencies may be very volatile and may experience significant drops in value over a short period of time. The value of a foreign currency will depend on, among other economic indicators, movements in exchange rates. Risks and special considerations with respect to foreign currencies include, but are not limited to, economic uncertainties, currency devaluations, political and social uncertainties, exchange control regulations, high rates of interest, a history of government and private sector defaults, significant government influence on the economy, less rigorous regulatory and accounting standards than in the United States, relatively less developed financial and other systems and limited liquidity and higher price volatility of the related securities markets.

Resource(s) to obtain additional information

Please consult available offering documents for any security we recommend for a discussion of risks associated with the product. We can provide these documents to you, or help you to find them.

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Mutual Funds

Description:

  • Many investors turn to mutual funds to meet their long–term financial goals. They offer the benefits of diversification and professional management, and are seen as an easy and efficient way to invest. A mutual fund is an investment company that pools assets from many investors and invests the money in stocks, bonds and other securities or assets in some combination. The holdings of the mutual fund are its “portfolio.” Each share of the mutual fund represents an investor’s proportionate ownership of the fund’s holdings and the income those holdings may generate.
  • There is a wide variety of mutual funds, covering a range of strategies and risks, including stock, fixed income, balanced, multi–asset and index funds. Although many mutual funds available through JPMS will follow a traditional long–only investment strategy, some mutual funds may utilize more complex investment strategies similar to those employed by private alternative investment vehicles, such as hedge funds, and private equity funds. Please see the section titled “Non– Traditional Mutual Funds and Exchange–Traded Products” for more information regarding these products. All mutual funds carry risk. Your investment will go up and down in value. You can lose some or all of your money. Your earnings can fluctuate too. All mutual funds have costs that lower your investment returns.
  • The mutual funds and share classes available through JPMS are limited and will change from time to time. It is important to work with your Financial Advisor to determine which funds and share classes are available for purchase in your account.
  • Before you invest, be sure to read the fund’s prospectus to learn about the fund you’re considering. The fund prospectus contains important information regarding the fund’s investment objectives, strategies, risks, charges, expenses and other matters significant to your investment choice. By clearly understanding the investment you’re considering, you’ll be better prepared to make a sound investment decision. To obtain a prospectus, please contact your Financial Advisor.

Fees and Expenses:

Fees and charges paid directly by investors – share classes

  • In general, there are fees you pay to a mutual fund company and/or financial intermediary when you purchase a mutual fund share class. Each share class invests in the same investment portfolio of securities, but has different sales charges and expenses. Among the most common retail brokerage share classes, and the ones generally available through the JPMS platform, are Class A and Class C shares. Certain other mutual fund share classes are subject to conditions and restrictions and may not be available for purchase by all investors. Investors should be aware that the share class of a fund available through the JPMS brokerage platform may differ from the share class available to similar accounts managed by or held at JPMS or its affiliates, including the J.P. Morgan Private Bank (Private Bank), and that certain lower cost fund share classes may be available outside of the JPMS brokerage platform. Clients should contact their Financial Advisor(s) for information about any limitations on share classes available through the brokerage platform.
  • The following is a summary of share classes and fees associated with client mutual fund purchases in a JPMS brokerage (i.e., not fee–based advisory) account. For additional information about mutual fund fees, you should refer to the fund’s prospectus.
    • Class A Shares – Front–End Sales Charge – Class A shares generally include a front–end sales charge (or load) that’s included in the purchase price of the shares and is determined by the amount you invest. These loads generally range from 0%–5.75% and are disclosed in the prospectus. The more you invest, the lower your purchase cost as a percentage of your investment. Many mutual fund families offer volume discounts known as “breakpoints,” based on the amount of investment. Information regarding a mutual fund’s breakpoints may be found in the prospectus. Class A shares usually have lower 12b–1 fees (annual marketing or distribution fees, described below) than C share classes offered by the fund and therefore may be the less costly method to purchase mutual funds for long–term investors. Many mutual funds provide that purchases of $1 million or more of Class A shares will not be subject to a front–end sales charge. However, the purchaser will incur a deferred or back-end sales charge if any of the shares are sold within a specified time period, generally 12–18 months. In addition, certain investors may be entitled to a sales charge or load waiver based, for example, on account type or employment affiliation (see “Waivers” below).
    • Class C Shares – Contingent Deferred Sales Charge – These are sales charges that are applied upon redemption of mutual fund shares within a specified number of years (varies by prospectus). These charges generally range up to 1% for C shares. These charges can be reduced or eliminated based on how long the shares are held and as described in the prospectus. While C shares generally do not include front–end sales charges, they do contain higher 12b–1 fees and may have a sales charge if you sell within the first year. In addition, 12b–1 fees never convert to a lower amount, and, over a longer period of time, the higher total fund expenses will result in lower returns than Class A shares.
    • Waivers – It’s important to read the prospectus and work with your Financial Advisor to learn how a particular fund establishes eligibility for mutual fund sales charge reductions and waivers. A mutual fund’s breakpoint schedule and waiver eligibility rules can be found in the fund’s prospectus or Statement of Additional Information (SAI). If you believe you are eligible for a front–end sales charge waiver, please notify your Financial Advisor
  • Share Class Availability – In your full-service brokerage account, you generally may purchase either Class A or Class C shares. Be aware that many mutual funds offer institutional, retirement, no–load or other share classes that have lower aggregate fees than Class A or Class C shares. Because JPMS receives higher compensation from mutual funds for Class A and/or Class C shares relative to less expensive share classes that may otherwise be available, there is a conflict of interest. If you believe you are eligible for a lower price share class, please contact your Financial Advisor for availability.
    • Institutional, retirement, no–load and other fund share classes may be available to you through JPMS asset–based fee advisory programs. In these programs, you typically pay an annual fee based on a percentage of the value of the assets held in your account, including the value of the fund shares. These programs provide features and benefits that may not be available in a full-service brokerage account that receives sales loads. The total cost of purchasing and holding mutual fund shares through an asset–based fee advisory program may be more or less than investing in mutual fund shares in a JPMS brokerage account that is serviced by your Financial Advisor.
    • No–load mutual funds may be purchased directly through many mutual fund companies without intervention of a financial intermediary and without payment of a service fee. Please consult the prospectus for the fund in which you are interested for direction on how to do so.
    • Private Bank, a different line of business, only recommends J.P. Morgan funds, and provides its clients an institutional share class.
    • You may purchase load–waived and no–load mutual funds in your You Invest Trade account. Representative– assisted trades are subject to a transactional fee.
    • For more information about mutual fund fees, please refer to the fund prospectus or contact your Financial Advisor.

Fees and expenses paid to or indirectly through the Mutual Fund

  • Fund fees and expenses – The ongoing costs of running a fund are called its fees and expenses. The fund pays these fees and expenses from the fund’s assets before distributing any earnings to investors, which reduces the returns of the fund. You can find the fees and expenses of a fund by looking at its “expense ratio,” which is disclosed in a fund’s fact sheet and prospectus/summary prospectus. The expense ratio is the fund’s total annual costs as a percentage of its assets, or net asset value (NAV). Types of fees and expenses include:
    • Management fees – The management fee is paid to the fund’s investment adviser for running the fund and managing its assets.
    • 12b–1 Fees – Fees paid by some mutual funds pursuant to Rule 12b–1 of the Investment Company Act of 1940. Rule 12b–1 fees allow funds to use fund assets to pay the costs of marketing and distribution of the fund’s shares.
    • Other Expenses – Other costs, such as shareholder servicing, recordkeeping, legal and accounting services, custody, transfer agency and administration, are also included in the fund’s expenses.
  • Additional Fees on Transactions – In addition to sales charges, you may need to pay other fees on certain mutual fund transactions, including:
    • Redemption fees – Some funds may charge fees to investors who redeem their shares within a specified time period (generally within a few months of purchasing them). These fees are typically up to 2%, and are usually returned to the portfolio to offset the trading costs.
    • Exchange fees – Exchange privileges allow shareholders to exchange their investment in a fund for another within the same fund family. However, in some cases, you may be charged a small exchange fee for doing so.

For complete information about mutual fund fees associated with specific funds, you should refer to the fund’s prospectus and SAI. You can find information about sales charges in the standardized fee table located near the front of a fund’s prospectus under the heading “Shareholder Fees” and information about the expenses you pay indirectly through fund assets in the standardized expense table under the heading “Annual Fund Operating Expenses.” Also, the Guide to Mutual Fund Investing contains this and other information about the mutual fund. Read the Guide carefully before investing. To view the Guide to Mutual Fund Investing, go to: www.jpmorgan.com/content/dam/jpm/securities/documents/guide-to-mutual-fund-investing.pdf.

Compensation JPMS receives from Mutual Fund Companies3

  • 12b–1 fees – JPMS receives 12b–1 fees from the mutual fund companies on its brokerage platform. Like other fees and expenses in a mutual fund, 12b–1 fees will reduce investment returns. The exact amount of 12b–1 fees paid out varies among funds and share classes but is disclosed in the applicable fund prospectus. The typical ranges of 12b–1 fees in mutual funds on the platform are as follows: A shares: 0.00%–0.50% (most frequently 0.25%); C shares: 0.00% – 1.00% (most frequently 1.00%).
  • Shareholder servicing/recordkeeping fees – Mutual funds or their fund affiliates may pay JPMS fees for providing certain administrative services, which may include maintaining and updating separate records for each client, preparing and delivering client statements, tax reporting, proxy voting and solicitation, processing purchase and redemption orders, processing dividends, distributing prospectuses and other fund reports, and responding to client inquiries. The fees for these services are typically called “shareholder servicing fees,” or “recordkeeping fees.” The fees may be based on the number of fund positions held by J.P. Morgan clients (generally in the range of $0–$20 per position) or based on assets, expressed as a percentage (generally in the range of 0%–0.25%). These fees generally are paid from investor assets in mutual funds, but in some cases are subsidized in part by affiliates or the distributor of the mutual funds (such affiliate payments may be referred to as “revenue sharing”).
  • Conflicts of interest – The level of payments to JPMS varies in any given year. Payments for sales of one fund’s shares may be more or less than the payments JPMS receives from other mutual funds’ advisers, distributors or other entities, and in certain instances, the payments could be significant. While any such payments will not change the net asset value or price of a fund’s shares, the payments create a conflict of interest, as there may be an incentive to promote and recommend those funds whose sponsors make significant payments. Similarly, JPMS has a conflict in recommending mutual funds that pay these fees instead of ETFs or other securities or products that do not pay any of these fees.

Financial Advisor Compensation for Mutual Funds Sales

Depending on the type of mutual fund and share class you buy, as well as account type, Financial Advisors receive 12b–1 fees and a portion of sales charges paid to JPMS by mutual fund companies, up to a maximum of 4% regardless of the prospectus charges. In some instances, where there is no sales charge to a client, Financial Advisors may receive a finder’s fee, paid by a mutual fund’s distributor, which is up-front, “time of sale” compensation. For more information, please refer to the applicable mutual fund prospectus.

Proprietary Mutual Funds and Affiliates Service Providers

Affiliates of JPMS provide investment management and other services, such as shareholder servicing, custody, fund accounting, administration, distribution and securities lending, to the J.P. Morgan Mutual Funds for which those affiliates receive fees. Therefore, J.P. Morgan as a firm will receive greater compensation if its clients buy shares of the J.P. Morgan Mutual Funds than if they buy shares of non–affiliated mutual funds.

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Money Market Funds

Description:

  • These funds seek to pay higher returns than interest–bearing bank accounts. Money market funds invest in high-quality, short–term debt securities and pay dividends that generally reflect short–term interest rates. However, they are not bank accounts, not FDIC–insured and not guaranteed to maintain their value. 
  • During extreme market volatility, money market funds may impose: 
    • “Redemption gates” that could temporarily prevent you from selling your shares.  
    • “Liquidity fees” that could charge up to 2% for selling your shares.  
  • Fund companies must designate money market funds (at the strategy level) as retail, institutional or government. 
    • Retail money market funds have policies and procedures reasonably designed to limit all beneficial owners to “natural persons” (for example, individuals, but not corporations) and maintain a stable $1.00 NAV. 
    • Institutional money market funds may also impose a “floating NAV” (no longer maintaining a stable price) that would allow the value of its shares to fluctuate in extreme conditions. 
    • Government money market funds invest at least 99.5% of their total assets in cash, government securities or equivalents and maintain a stable $1.00 NAV. 

Restrictions:

The money market funds and share classes available through JPMS are limited and will change from time to time. It is important to work with your Financial Advisor to determine which funds and share classes are available for purchase in your account.

Disclosures Language:

An investment in a money market fund is not insured or guaranteed by the FDIC or any other government agency, nor is it guaranteed by any private entity, such as its investment adviser or custodian. Although money market funds strive to preserve the value of the investment, it is possible to lose money by investing in them. 

Fees and expenses paid to or indirectly through the Money Market Fund:

  • Fund fees and expenses –The ongoing costs of running a fund are called its fees and expenses or its Annual Fund Operating Expenses. The fund pays these fees and expenses from its assets before distributing any earnings to investors, which reduces the returns of the fund. You can find the fees and expenses of a fund by looking at its “expense ratio,” which is disclosed in a fund’s fact sheet and prospectus/summary prospectus. The expense ratio is the fund’s total annual costs as a percentage of its assets, or NAV. Types of fees and expenses may include: 
    • Management fees – The management fee is paid to the fund’s investment advisor for researching and selecting securities in the portfolio, as well as some administrative expenses. 
    • 12b–1 fees – Fees paid by some money market funds pursuant to Rule 12b–1 of the Investment Company Act of 1940. Rule 12b–1 fees allow funds to use fund assets to pay the costs of marketing and distribution of the fund’s shares. 
    • Other expenses – Other costs, such as shareholder servicing, recordkeeping, legal and accounting services, custody, transfer agency and administration, are also included in the fund’s expenses. 
  • Additional fees on transactions – In addition to sales charges, you may need to pay other fees on certain money market fund transactions, including:
    • Liquidity fees – In times of extreme market volatility, some money market funds may charge fees to investors who redeem their shares, typically up to 2%.  
    • Exchange fees – Exchange privileges allow a shareholder to exchange their investment in a fund for another within the same fund family. However, in some cases, you may be charged a small exchange fee for doing so.
  • For complete information about money market fund fees associated with specific funds, you should refer to the fund’s prospectus and SAI. You can find information about sales charges in the standardized fee table located near the front of a fund’s prospectus under the heading “Shareholder Fees” and information about the expenses you pay indirectly through fund assets in the standardized expense table under the heading “Annual Fund Operating Expenses.” 

Compensation J.P. Morgan receives from Money Market Fund Companies:3

  • 12b–1 fees – JPMS may receive 12b–1 fees from the money market funds approved for its full–service brokerage platform. Like other fees and expenses in a money market fund, 12b–1 fees will reduce investment returns. The exact amount of 12b–1 fees paid out varies among funds and share classes but is disclosed in the applicable fund prospectus. The typical range of 12b–1 fees for money market funds is 0%–0.25%. 
  • Shareholder servicing/rRecordkeeping fees – Money market funds or their fund affiliates may pay JPMS fees for providing certain administrative services, which may include maintaining and updating separate records for each client, preparing and delivering client statements, tax reporting, proxy voting and solicitation, processing purchase and redemption orders, processing dividends, distributing prospectuses and other fund reports, and responding to client inquiries. The fees for these services are typically called “shareholder servicing fees,” or “recordkeeping fees.” Such fees may be based on the number of positions held by J.P. Morgan clients (generally in the range of $0–$20 per position) or based on assets, expressed as basis points (generally in the range of 0%–0.50%). These fees generally are paid from investor assets in money market funds, but in some cases are subsidized in part by affiliates or the distributor of the funds (such affiliate payments may be referred to as “revenue sharing”).
  • Revenue sharing – Separate from the sales charges, 12b–1 fees and shareholder servicing fees described above and in the fund’s prospectus, money market fund sponsors or distributors may make additional payments to JPMS or its affiliates in certain sales channels based on overall sales and/or assets. These payments are typically called revenue sharing and are paid from the entity’s revenues or profits, not from the fund’s assets, but the entity’s revenues or profits may reflect fees paid to them by the fund. JPMS may receive a payment as a percentage per year of the amount held in these money market funds. Percentage payments generally range from 0% to 0.29%. 

The level of payments to JPMS varies in any given year. Payments for sales of one fund’s shares may be more or less than the payments JPMS receives from other money market funds’ advisers, distributors or other entities, and in certain instances, the payments could be significant. While any such payments will not change the net asset value or price of a fund’s shares, the payments create a conflict of interest, as there may be an incentive to promote and recommend those funds whose sponsors make significant payments.

Financial Advisor Compensation for Money Market Funds Sales:

Depending on the type of money market fund and share class you buy, as well as account type, Financial Advisors may receive some or all of the compensation described in the Compensation to J.P. Morgan above, generally up to 0.07% of the total. Financial Advisors may also receive finder’s fees, paid by a money market fund’s distributor, which is up-front, “time of sale” compensation to dealers for their activities that result in the sale of a money market fund. Amounts vary by fund company, category, classification and share class. For more information, please refer to the applicable money market fund prospectus.  

Proprietary Money Market Funds and Affiliates Service Providers:

Affiliates of JPMS provide investment management and other services, such as shareholder servicing, custody, fund accounting, administration, distribution and securities lending, to the J.P. Morgan Money Market Funds for which those affiliates receive fees. Therefore, J.P. Morgan as a firm will receive greater compensation if its clients buy shares of the J.P. Morgan Money Market Funds than if they buy shares of non–affiliated money market funds. 

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Exchange-Traded Products

Description:

  • Exchange–Traded Products (ETPs) seek to provide investors with exposure to financial instruments, financial benchmarks or investment strategies across a wide range of asset classes. In addition to Exchange–Traded Funds (ETFs), which are index funds or trusts that are listed on an exchange and which are linked to the collective performance of an entire stock or bond portfolio, ETPs include Closed-End Funds (CEFs) and Exchange-Traded Notes (ETNs).
  • Like mutual funds, certain ETPs, such as ETFs, are SEC–registered investment companies that offer investors a way to pool their money in a fund that makes investments in stocks, bonds, other assets or some combination of these investments and, in return, receive an interest in that investment pool. Other types of ETPs, such as ETNs, are structured as trusts or partnerships that may physically hold a precious metal, a portfolio of futures or other derivative contracts on certain commodities or currencies, or are secured debt obligations of financial institutions.
  • Unlike mutual funds, which have their net asset values calculated at the end of each trading day, the prices for ETPs typically change within the trading day, fluctuating with supply and demand. Therefore, for example, the price of an ETF may be different than its net asset value. ETP trading occurs on national securities exchanges and other secondary markets, rather than the investment company selling shares directly to, or redeeming their shares directly from, investors (as is the case with mutual funds). 
  • Leveraged, inverse or volatility ETPs are highly complex financial instruments and, due to the effects of compounding, their performance over longer periods of time may differ significantly from their stated daily objective. Leveraged and inverse ETPs typically are designed to achieve their stated performance objectives on a daily basis. Some investors might invest in these ETPs with the expectation that the ETPs may meet their stated daily performance objectives over the long term, as well. Investors should be aware that performance of these ETPs over a period longer than one business day can differ significantly from their stated daily performance objectives. Leveraged and inverse ETPs may pursue a range of investment strategies through the use of swaps, futures contracts and other derivative instruments, and are inherently more volatile than their underlying benchmark or index. Additionally, leveraged ETPs positions will be subject to applicable maintenance margin requirements that may be greater than or differ from margin requirements on their non–leveraged counterparts. 
  • There are costs associated with owning ETPs. Before investing in ETPs, you should consider the products’ investment objectives, risks, charges and expenses. Contact your Financial Advisor for a prospectus or, if available, a summary prospectus containing this information. ETPs are subject to market fluctuation and the risks of their underlying investments; ETPs are also subject to management fees and other expenses. Unlike mutual funds, ETP shares are bought and sold at market price, which may vary from the published value of the ETP and are not individually redeemed from the fund. For example, the market price of an ETF may be higher or lower than its NAV. 
  • Please see the section titled “Non–Traditional Mutual Funds and Exchange–Traded Products” for more information regarding these products.

 

 

Exchange–Traded Funds minimum commission per transaction: $42.00 Principal Money Base Charge % of Notional Lot Charge (0–10) Lot Charge (10+) Max Commission
Up to $20,000 N/A 2.00%  N/A 2.00%
$20,000 to $99,999 N/A 1.50% N/A 1,50%
$100,000 to $499,999 N/A 1.25% N/A 1.25%
$500,000 to $999,999 N/A 1.00% N/A 1.00%
$1,000,000+  N/A 0.75% N/A 0.75%

 

Minimum and Maximum Commissions for Equity Transactions:

  • Minimum: $25 on trades with a notional value >$100. 
  • Maximum: 2% with the exception of $25 minimum on trades. 
  • Any trades priced at zero will remain at zero. 

The schedule details how “full rate” commissions are calculated for equity transactions. Actual fees and charges may vary from one account to another based on a variety of factors and are at the discretion of JPMS. In addition, all such fees and charges, including the following commission rates, are subject to change periodically. Please refer to your confirm or contact your JPMS Financial Advisor for the actual commission amount payable by the plan at any given point in time or with respect to a specific trade. Please also note that JPMS or an affiliate may act as principal on certain transactions. In such cases, JPMS or an affiliate receives compensation from clients by adding a mark–up to purchases, and deducting a mark–down from sales. This mark–up or mark–down will be reflected in the price when JPMS or an affiliate acts as principal. 

Restrictions:

JPMS may restrict activity in certain types of financial instruments including, but not limited to, crypto–linked instruments. Please contact your J.P. Morgan team for product availability through your full-service brokerage account. 

Risks and other relevant information:

  • The prospectus of an ETP contains important information regarding the investment objectives of the ETP, its merits, risks, charges, expenses and other matters of interest, and must be read carefully before a decision is made to invest. JPMS will provide a copy of the prospectus to you upon request. 
  • ETPs are subject to risks similar to those of stocks. Investment returns will fluctuate and are subject to market volatility, so that an investor’s shares, when redeemed or sold, may be worth more or less than their original cost. In addition, there is no guarantee that an ETP will track the exact performance of its index. 
  • Like mutual funds, some ETPs may not, for example, have the liquidity of traditional ETPs, provide periodic pricing or valuation information to investors, and be subject to the same regulatory requirements as traditional ETPs. These non–traditional ETPs also typically pursue alternative investment strategies. While traditional ETPs generally focus their investment strategies on long–term buy–and–hold stock and bond investing, non–traditional ETPs generally employ more complex trading strategies, such as selling securities short in anticipation of a drop in their price, using leverage, and purchasing options and futures. Some non–traditional funds also focus their investment strategies on investing in gold, commodities (such as copper and oil) or real assets such as real estate. These strategies have generally been associated with alternative investment products such as hedge funds, may charge higher fees, have higher expenses and have a higher risk of the complete loss of the investment compared to traditional ETPs.

Resource(s) to obtain Additional Information:

Please consult available offering documents for any security we recommend for a discussion of risks associated with the product. We can provide these documents to you, or help you to find them.

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Alternative Investments

Hedge Funds, Private Equity Funds, Real Estate Funds

Description:

  • Non–traditional, or alternative, investment strategies include investments in hedge funds, private equity funds, real estate funds and other unregistered funds (including funds that invest in such funds). Such funds are sometimes referred to as private investments or private funds because they are typically organized pursuant to exemptions from registration under federal securities laws and therefore are not offered to the general public.
  • Although interests in private investment funds sometimes may be resold in privately negotiated transactions, the prices realized on these sales could be less than the original investment, and are likely to be less than the current net asset value. 
  • Private funds are offered only by confidential private placement memorandum or similar document (the PPM). The PPM provides important detailed information regarding fees, merits, risks, investment objectives and strategies and other matters of interest, and must be read carefully before a decision is made on whether to invest. 
  • J.P. Morgan affiliates may organize and offer interests in private funds and may have an ownership interest in such funds. In addition, JPMC affiliates may provide advisory, management, administrative or other services to JPMC, and will normally be compensated separately for such functions. JPMS or another JPMC affiliate may act as placement agent for such interests and in such case will be compensated by the private funds for providing placement services. Such compensation is in addition to fees and commissions you pay in connection with purchasing an interest, or in connection with your investment management, brokerage or custody account. 

Fees:

In its capacity as placement agent, J.P. Morgan charges clients an origination fee of up to 2% of the amount invested. In addition, J.P. Morgan also earns a placement fee, paid by the private fund (or sponsor thereof) whose interests are being offered, in an amount of up to 5% of the amounts invested by J.P. Morgan clients. The amounts of any such fees will be disclosed to clients prior to their making an investment. The origination fee is separate from, and in addition to, advisory, management, administrative, placement, performance, servicing or other fees J.P. Morgan may earn from the fund sponsor or the fund for services provided to the fund.

Restrictions:

Only J.P. Morgan approved hedge funds, private equity funds, real estate funds, and other private funds will be recommended. All approved funds are periodically reviewed. 

Risks and other relevant information:

  • Private Funds:
    • Often engage in leveraging and other speculative investment practices that may increase the risk of the complete loss of the client’s investment; 
    • Can be highly illiquid because no trading market exists and there are restrictions on resale, transfer, withdrawal or redemption of interests; 
    • Can be hard to value, and provide infrequent pricing or valuation information; 
    • May involve complex tax structures and delays in distributing important tax information; 
    • Are not subject to the same regulatory requirements as mutual funds; and 
    • Often charge performance fees in addition to management fees.
  • Although private equity and real estate fund interests sometimes may be resold in privately negotiated transactions, the prices realized on these sales could be less than the original investment and are likely to be less than the current net asset value. Most private fund investments require the client to maintain an account with J.P. Morgan or one of its affiliates for so long as the client owns the private fund.
  • As described above under “Fees,” J.P. Morgan receives payments from private funds (or sponsors thereof) for the investments made by J.P. Morgan clients. The fees paid to J.P. Morgan by the sponsor or company whose interests are being offered create a potential conflict of interest in the form of an additional financial incentive to J.P. Morgan for making available to its clients such opportunities.

Resource(s) to obtain additional information:

Please consult available offering documents for any security we recommend for a discussion of risks associated with the product. We can provide these documents to you, or help you to find them.

Morgan Private Ventures

Description:

Morgan Private Ventures (“MPV”) is a program that makes available opportunities to invest in private companies, real estate, venture capital, growth equity and other private investments, including affiliated managed products, to certain highly–qualified clients through their full–service brokerage account. Investment opportunities through MPV are normally offered pursuant to exemptions from registration under the federal securities laws and are therefore highly illiquid.  

Fees:

In its capacity as placement agent for an MPV opportunity, J.P. Morgan may charge clients an origination fee which, if charged, will be up to 2% of the amount invested. J.P. Morgan may also earn a placement fee, paid by the sponsor or the company whose interests are being offered. If paid, such placement fee will be in an amount of up to 5% of the amounts invested by J.P. Morgan clients, or will be an amount of 10% of the profit interest received by the investment opportunity sponsor with respect to amounts invested by J.P. Morgan clients. The amounts of any such fees will be disclosed to clients prior to their making an investment. 

Restrictions:

Only clients meeting certain requirements, including qualifying as an “accredited investor” within the meaning of Rule 501(a) under the United States Securities Act of 1933, as amended and as an “institutional account” as defined in FINRA Rule 4512(c) m, are eligible to participate. 

Risks and other relevant information:

  • The fees paid to J.P. Morgan by the sponsor or company whose interests are being offered creates a potential conflict of interest in the form of an additional financial incentive to J.P. Morgan for making available to MPV such opportunities.
  • There is generally no secondary market for such opportunities, and no assurance can be given as to the likelihood that an active trading market will develop or the liquidity of such a market; accordingly, no assurance can be given that an investor will be able to sell, transfer, assign or otherwise dispose of an interest in an opportunity. Opportunities may have little or no operating history, and the information available about unregistered opportunities will be less extensive than is available for an entity whose securities are registered. There is no assurance that any opportunity will return the capital invested, or that there will be any return on any capital you invest. 

Resource(s) to obtain Additional Information:

Please consult any available offering documents for any security we recommend for a discussion of risks associated with the product. We can provide those documents to you, or help you to find them. 

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Annuities

Description:

What is an annuity?

  • An annuity is a contract between you and the insurance company, where you make a lump sum or series of payments in exchange for certain guarantees related to income, death benefits, accumulation and tax deferral, to name a few.
  • There are different types of annuities, many of which are designed to meet specific needs and help consumers achieve their retirement goals. With a deferred annuity, assets accumulate on a tax-deferred basis until distributions are made, usually during retirement; with an immediate annuity, the contract owner converts assets into income and starts receiving payments right away. Fixed annuities accumulate savings or distribute income at guaranteed rates and in guaranteed amounts; variable annuities accumulate savings or distribute income based on the performance of the underlying investment options chosen by the contract owner.
  • Annuities are created by insurance companies and are filed with the various state insurance commissioners for approval. JPMS is the distributor of the annuity product on behalf of the insurance company through Chase Insurance Agency Inc. (“CIA”).
  • It is important to note that Insurance products are not bank deposits, and are not insured by the FDIC or any other agency of the United States, nor are they obligations of, nor insured or guaranteed by JPMCB, CIA, JPMS or their affiliates, except where specifically disclosed. Brokerage services are offered through JPMS, member of FINRA and SIPC and an affiliate of JPMCB. Securities (including variable annuities), certain insurance products and annuities involve investment risks, including the possible loss of value. Variable annuities are not guaranteed and the value may go up and down. There is no assurance that the investment objectives of any variable annuity subaccount will be met. Past performance is no guarantee of future results. The value of a variable annuity will fluctuate depending on the performance of the investment subaccounts chosen as a result of market conditions and other factors. Upon liquidation, the value of a variable annuity may be more or less than the original purchase price. Annuity guarantees are based on the claims-paying ability of the issuing insurance company.

Types of Annuities

  • Fixed annuities – Fixed annuities accumulate funds or distribute income at guaranteed rates and in guaranteed amounts. Fixed annuities earn interest at a set rate, for a specified period of time. A fixed annuity may be a good choice if you are seeking predictable returns, tax–deferred growth and principal protection. Tax–deferred fixed annuities also offer an income option that converts the balance of the fixed annuity into a guaranteed income stream through annuitization. Note: some fixed annuities may have a Living Benefit Rider that can provide income without annuitization.
  • Fixed index annuities – Fixed index annuities are designed to provide a return based on the performance of an underlying index such as the S&P 500. While the benchmark index does track to the market, the client is not directly exposed to the market. Typically the client's return is either a percentage of the underlying index's performance, or the return is capped at a certain percentage of the index's performance. Fixed index annuities provide the client the opportunity to have growth based on market performance while having 100% downside protection in down markets.
  • Single premium immediate annuities (SPIAs) – SPIAs are designed to provide an immediate income stream through annuitization of the purchase payment. SPIAs typically require the income benefit to commence within 13 months of purchase. Note: As with any annuity, guarantees are based on the claims–paying ability of the issuing insurance company.
  • Variable annuities – Variable annuities accumulate funds or distribute income based on the performance of the underlying investment options chosen by the contract owner. Some of the features variable annuities may provide include: (1) Guaranteed Lifetime Income; (2) Standard or Enhanced guaranteed minimum death benefits, and/or (3) tax deferral. A variable annuity offers a range of investment options. The value of your investment as a variable annuity owner will vary depending on the performance of the investment options you choose. The investment options for a variable annuity are typically investment subaccounts or funds that invest in stocks, bonds, money market instruments or some combination of the three. 
  • Buffer annuities – Buffer annuities are designed to provide a return based on the performance of an underlying index such as the S&P 500, and similar to index annuities, while the index does track to the market, the client is not directly exposed to the market. The two key differences between a buffer and traditional index annuity is the buffer annuity will typically provide higher caps or percentage of the index performance of a return but limits downside protection options of 10%, 20% or 30% versus the traditional index providing 100% downside protection. 
  • Advisory Fee-Based Variable Annuities – An advisory fee-based variable annuity is sold without a sales load, and instead is distributed by advisors for an ongoing annual asset-based advisory fee. Advisors selling advisory fee-based annuities do not receive commissions for the sale of the variable annuity, but instead the advisor and the associated investment adviser charge a fee for the investment advice related to asset allocation of the underlying subaccounts/funds in the variable annuity.

Fees:

Annuity product fees, including contingent deferred sales charges, are collected by the insurance carrier. Depending on the type of annuity and the issuing insurance company, clients will incur certain product fees associated with their annuity. These fees range from fees to cover the cost of insurance to investment management fees. The following outlines the fees typically incurred on annuities by product type:

Fixed Rate for Term Annuities

  • Fixed annuities do not have explicit fees.
  • Surrender charges – If applicable, surrender charges are incurred if the annuity is liquidated during the surrender charge period, or withdrawals in excess of the “free withdrawal amount” afforded by the contract are taken prior to the contract terms maturing. These charges offset the cost the insurance carrier incurs for various acquisition costs and early liquidation of investments it makes to back the guarantees. Surrender charges are stated in terms of a schedule that defines the percent of the surrender charge for that particular year and usually declines until the contract term matures. Our fixed annuities surrender charges match the guarantee period of the interest rate credited to the contract. For example, our 3–year fixed deferred annuities will have a year surrender charge, and our 5–year fixed deferred annuities will have a 5–year surrender charge.

Fixed Rate for Term with a living benefit rider

  • Fixed deferred annuities with living benefits may have a fee associated with the living benefit rider. These fees are charged to cover the cost of providing guaranteed living benefits.
  • In NY – There is no explicit fee for the Living Benefit. 
  • Countrywide – The fee in the non–NY product is 0.95%, and is charged annually against the contract value.

Fixed Index Annuities

  • Fixed index annuities do not have an explicit cost.  
  • Surrender charges – If applicable, surrender charges are incurred if the annuity is liquidated, or excess withdrawals are taken prior to the contract terms maturing. These charges offset the cost the carrier incurs for various acquisition costs and early liquidation of investments it makes to back the guarantees. Surrender charges are stated in terms of a schedule that defines the percent of the surrender charge for that particular year and usually declines until the contract term matures. Our index annuities have 7–year surrender charges that decrease from 9% to 3% over the surrender charge period.

Variable annuities

  • Mortality & expense fees – These fees pay for the insurance guarantees in the annuity, such as guaranteed lifetime income or a death benefit. They can range from 1.15% to 1.55% and are charged against the contract value daily. 
  • Contract fee – This fee covers the maintenance of the contract, such as producing statements, mailings and other client services. It is usually a flat fee that ranges from $30.00 to $50.00, and it is charged annually. The contract fee is normally waived above certain contract amounts, anywhere from $50,000 to $100,000.
  • Average fund expense – This fee covers the investment management and operating expense of the underlying investment subaccounts. The fee ranges from 0.70% to 1.20%, and is usually charged daily against the contract value.
  • Surrender charges – If applicable, contingent deferred sales charges (CDSC) are only incurred if the annuity is liquidated during the surrender charge period, or withdrawals in excess of the “free withdrawal amounts” afforded by the contract are taken prior to the contract terms maturing. These charges offset the cost the insurance carrier incurs for various acquisition costs and early liquidation of investments it makes to back the guarantees. CDSCs are stated in terms of a schedule that defines the percent of the surrender charge for that particular year, and usually declines until the contract term matures. For example, a typical CDSC on a traditional variable annuity would be 7%, 7%, 6%, 6%, 5%, 3% and 1%; meaning if the client surrenders the contract within the first year of purchase, they would be charged 7% of the contract value; if they surrender the contract in year 6, they would be charged 3% of the contract value. 
  • Living benefits rider fees – These fees are charged to cover the cost of providing guaranteed lifetime income. In general these fees range from 0.95% to 1.45%. The fee can be charged daily, quarterly or annually and is assessed against the contract value, benefit base or combination. Please refer to your contract for specific rider fees and charges.
  • Enhanced death benefit fees – These fees are charged to cover the cost of providing guaranteed and/or stepped–up death benefits. Similar to living benefit rider fees, enhanced death benefit fees can range from 0.2% to 0.65%. They can be charged daily, quarterly or annually and are assessed against the contract value, benefit base or a combination. Please refer to your contract for specific rider fees and charges.

Buffer Annuities

  • Buffer Annuities do not have an explicit cost, unless the buffer annuity offers subaccounts in addition to the indices. In those cases, similar to a variable annuity, there would be subaccount fees and M&E fees calculated on the value of those subaccounts.
  • Average fund expense – If applicable, this fee covers the investment management and operating expense of the underlying mutual funds. This fee ranges from 0.7% to 0.9% and is usually charged daily against the value of the underlying subaccount. 
  • Surrender charges – If applicable, surrender charges are incurred if the annuity is liquidated, or excess withdrawals are taken prior to the contract terms maturing. These fees offset the cost the carrier incurs for various acquisition costs and early liquidation of investments it makes to back the guarantees. Surrender fees are stated in terms of a schedule that defines the percent of the surrender charge for that particular year and usually declines until the contract term matures. Our Buffer has either a 5– or 6–year surrender charge schedule that decreases from 6% to 3% over the surrender charge period.
  • Mortality & expense and administrative fees – If applicable, these fees pay for the insurance guarantees in the annuity, such as guaranteed lifetime income or a death benefit. They can range from 1.15% to 1.25%, and are charged against the value of the underlying subaccounts daily.

Advisory Fee-Based Variable Annuities

Compensation:

  • Annuity commissions are not fees and are not taken from the contract value.
  • J.P. Morgan operates its insurance business through Chase Insurance Agency Inc. (CIA). CIA maintains agreements with insurance companies to represent them in selling and servicing their insurance and annuity products and to receive compensation. Pursuant to those selling agreements with the carriers, CIA receives compensation based upon a percentage of the total purchase payments and/or a percentage of the total contract value of the annuity contract. The amount of compensation paid may vary by product type, so more compensation may be received by your Financial Advisor for selling one annuity product type versus another annuity product type; however, the portion of compensation that is passed on to the Financial Advisor is level by product type. 
  • Unless otherwise indicated, all compensation is earned by CIA. For additional information on the compensation paid by the issuing insurance company for annuity products, please refer to the applicable prospectus, or other documents provided by your Financial Advisor or the insurance carrier.
  • Clients that select an advisory fee-based variable annuity do not pay commissions, but instead pay an annual investment advisory asset-based fee to JPMS. This fee is paid out of the annuity contract assets to JPMS for investment advisory services. Clients should review the prospectus to the advisory fee-based variable annuity and the Form ADV disclosure brochure of JPMS for information about the advisory variable annuity asset allocation program and the applicable fees for the program. Fees and costs associated with advisory are available on request or at www.jpmorgan.com/securities/securities/adv.

Paid to CIA

A portion of the compensation CIA receives is paid to your Financial Advisor as noted in the section “Paid To Financial Advisors,” below.

  • We receive compensation for sales of annuities from the insurance carriers that issue the annuity products as follows:
    • For variable annuities, either:
      • a one–time up-front commission that ranges from 6% to 7.15% of initial purchase payment, or
      • a trailing commission, which in year one ranges from 1.25% to 2.15% of the initial purchase payment, and in subsequent years is typically 1% of the account value. 
    • Fixed annuity commissions range from 0.5% to 2.5%. 
    • Index annuity commissions range from 2.5% to 3.5% based on initial purchase payment. 
    • Single premium immediate annuity commissions are 4%. 

Paid to Financial Advisors

All Financial Advisor commissions stated above are gross commissions; the actual net payment the Financial Advisor receives will vary.

  • Variable annuities – Advisors can receive an upfront one-time commission of 4%, or a trail commission of 1.25% in year one, and 1% starting in year two, as long as the contract stays in force.
    • After June 30, 2020, all new variable annuities sales will only pay the trail option
    • Contracts issued prior to June 30, 2020, will continue to pay the Financial Advisor based on the compensation chosen at the time of the original sale
  • Fixed deferred annuities pay the Financial Advisor 1% for clients less than 86 years old, and % for clients age 86+
  • Fixed deferred annuities with a living benefit – pay the Financial Advisor a one–time commission of 2%.
  • Fixed index annuities pay the Financial Advisor 2% for purchase payments over $100,000, and 3% for purchase payments under $100,000.
  • Single premium immediate annuities pay the Financial Advisor a one–time payment of 4%.

Restrictions:

  • JPMS has guidelines on when certain products/riders are suitable, and may impose age restrictions that are younger than those stated in the contract and/or prospectus.
  • Waivers may not be available in all states.

Risks and other Relevant Information:

  • Fixed annuities – Fixed annuities are designed to provide a stated return for a stated period of time. While our fixed annuities provide a guaranteed return of the original purchase payment if the contract is fully surrendered in the surrender charge period, early withdrawals and partial surrenders could result in the loss of any earnings credited to the contract, in addition to potential tax penalties.

A fixed annuity typically does not have cost–of–living adjustments to keep pace with inflation, so your spending power from the payments you receive may decline over time. If inflationary protection is a priority for you, you may want to consider financial products other than a fixed annuity.

  • Fixed index annuities – Fixed index annuities are designed to provide a return based on indices such as the S&P 500. While our fixed index annuities provide a guaranteed return of the original purchase payment upon a full surrender, early withdrawals and partial surrenders could result in the loss of any returns credited to the contract, in addition to potential tax penalties.

An index annuity typically does not have cost–of–living adjustments to keep pace with inflation, so your spending power from the payments you receive may decline over time. If inflationary protection is a priority for you, you may want to consider financial products other than an index annuity.

Though an indexed annuity can be an important part of your overall portfolio and provide steady income, the assets you commit to an index annuity will not be available to other types of financial products or investments. You should carefully consider your overall needs and goals prior to committing any part of your assets to an index annuity.

  • Single premium immediate annuities (SPIA) – SPIAs are designed to provide an immediate income stream through annuitization of the purchase payment. SPIAs typically require the income benefit to commence within 13 months of purchase. Since immediate annuities provide lifetime income via annuitization once income starts, there is no longer a deferred or surrender value to the annuity. You should carefully consider your ability to meet emergency expenses prior to converting your assets into an income stream. 
  • Variable Annuities – Variable annuities are designed as an investment for long–term goals. They are not suitable for short–term goals because you may be subject to charges or other penalties if you withdraw your money early. Variable annuities also involve investment risks similar to owning a mutual fund. Note that if you sell or withdraw money from a variable annuity too soon after your purchase, the insurance company will impose a “surrender charge.” Surrender charges will reduce the value of, and the return on, your investment. Carefully review the annuity contract and, where applicable, the investment subaccount prospectuses. 

Your contract value is not guaranteed. It may increase or decrease based on investment performance, additions and withdrawals. Election of a variable annuity living benefit rider does not guarantee a rate of return on your contact value— only a percentage of the withdrawal amount.

  • Buffer annuities – Buffer annuities are designed as an investment for long–term goals. They are not suitable for short– term goals because you may not be able to readily access your funds once invested in one of the buffered annuity segments, and you may be subject to charges or other penalties if you withdraw your money early. While buffered annuities provide certain downside market protections, your contract value is not guaranteed. That value may increase or decrease based on the investment performance of the underlying indices.

Resource(s) to Obtain Additional Information:

  • Prior to sale, Financial Advisors are required to deliver the annuity buyers guide, which is a regulatory requirement. The Guide details what consumers should know and what they should ask a Financial Advisor when contemplating an annuity, including fees and cost. Clients are also provided a prospectus if required. 
  • In order to initiate the purchase of any annuity, a Summary Statement of Charges form is included as part of the application documents a client must sign. The Summary Statement of Charges form is specific to each product type and details the cost and fees associated with the product.
  • When the contract is issued, the contract is mailed directly to the client’s resident address. The contract contains all the fees, terms and conditions of the contract inclusive of carrier service numbers, websites where additional information can be obtained.

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1. The firm leading the underwriting process may bring together several firms (or “syndicate”) to distribute the new offering.
2. A forward contract, or futures contract, involves an agreement of contract terms on the current date with the delivery and payment at a specified future date.
3. The fee ranges quoted in this section are generally for the funds approved for purchase on the JPMS full–service brokerage platform. Similar fees may be taken by J.P. Morgan in connection with other funds held upon client request, and applicable rates may differ.