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Compensation and Potential Conflicts

JPMS and its affiliates earn compensation in various ways, which you should be aware so you can better evaluate the recommendations you receive from your Financial Advisor and JPMS. JPMS earns revenue from our clients, our affiliates and, for some products and services, from third parties, including product vendors, underwriters and investment managers whose products and services are purchased by clients. We also receive compensation as a result of intercompany profit–sharing and servicing agreements.

In a brokerage account, you generally compensate JPMS and the registered Financial Advisors located in a J.P. Morgan Securities office through costs incurred with each transaction. This differs from an investment advisory account relationship in which the compensation is fee-based, not transaction-based, and the client pays a set fee or a fee based on the percentage of assets in the account in an advisory program. Miscellaneous account and administrative charges, as noted earlier, associated with your account will also be charged to your account. 

Financial Advisor Compensation

We design our compensation program to encompass best practices, support our business objectives and enhance shareholder value. J.P. Morgan’s system plays a significant role in our ability to attract, retain and motivate the highest quality workforce. Compensation creates incentives for Financial Advisors to, among other things, recommend certain product and services, generate business and solicit assets to our firm. JP Morgan Policies and Procedures exist to mitigate Conflicts of Interest, where possible. See below components of the compensation plan, outlining ways in which different conflicts of interests manifest themselves. 

Cash Compensation

The basis for the compensation to your JPMS Financial Advisor is primarily the fees and commissions paid in connection with the products and services that clients choose and it varies based on certain factors. These factors include the total revenue generated by clients and accounts covered by the Financial Advisor, the type of clients covered by the Financial Advisor and the types of products and services purchased, sold or received by such clients.

The underlying calculation of a Financial Advisor’s compensation is based on total revenue attributable to that Financial Advisor.

Total revenue generally includes commissions, mark–ups/mark–downs and fees collected on fee–based products and services and revenue earned on banking–related products. The percentage of total revenue paid to your Financial Advisor varies and is subject to change but generally increases as total revenue attributable to your Financial Advisor increases. For most Financial Advisors, the range is generally a 40% to 50% payout.

Financial Advisors may also receive financial incentives to join and/or remain at JPMS. These incentives, which are in addition to the compensation received in connection with total revenue attributable to them, may take various forms, including an up-front loan, annual cash payment, Restricted Stock Units (RSUs) and performance awards. Performance awards can be revenue–based, asset–based or a hybrid of both and will be contingent upon meeting requirements set forth in the respective Financial Advisor's employment contract and provided to the Financial Advisor in an agreed upon split percentage between cash and RSUs.

In addition, the Financial Advisor may be eligible to receive a Growth Award, which is earned on an annual basis. In order to qualify, the Financial Advisor’s length of service with JPMS must be at least four years and his/her total attributable revenue must grow a minimum of 5% when comparing the current year versus the prior year. The award is granted in the form of RSUs. The award values range from 1% to 4% of total attributable revenue.

Financial Advisors do not provide investment advice and so do not receive revenue credit with respect to transactions in You Invest accounts.


The Financial Advisor may receive compensation from the interest and fees paid by the client on margin debit balances held by the client in any account. As a result, JPMS and the Financial Advisor have a financial incentive for the client to incur margin debt to buy securities in the client’s account because the client will be required to pay JPMS interest and fees on the debt, and they have a further financial incentive for the client’s margin debit balance.

Furthermore, if you have a margin account with us, as permitted by federal law, we may also use certain securities in your account, among other things, for settling short sales and lending the securities for short sales, and as a result we receive compensation in connection therewith. Financial Advisors therefore have a financial incentive to recommend margin.

Non–Cash Compensation

Financial Advisors may receive certain non–cash compensation under limited circumstances. J.P. Morgan has implemented policies and procedures intended to ensure that its employees avoid actual or perceived conflicts of interest when giving or receiving non–monetary compensation from relevant parties, and comply with all applicable federal laws and regulations. To that end, J.P. Morgan generally prohibits the acceptance of gifts, entertainment or other non–monetary compensation in connection with the services we provide to any particular client, or in return for any business of the firm. Exceptions may be made for certain nominal non–cash gifts to employees of less than $100 meeting certain criteria, including potentially from third-party investment managers. Meals, refreshments and entertainment in the course of a host–attended business–related meeting or other occasion may also be permitted in limited circumstances. Travel or accommodation expenses are prohibited. J.P. Morgan policies set conditions for each of these types of payments, and do not permit any gifts or entertainment unless it is clear that the gift–giving person is not trying to influence or reward the employee inappropriately in connection with any business decision or transaction and the gift is unsolicited. Providers participating in JPMS programs are not required to make any of these types of payments. 

Other Non–Cash Compensation and Subsidies

Third–party providers (such as fund companies) may participate in JPMS–sponsored internal training and education conferences and meetings, seminars and sales meetings and may make payments to, or for the benefit of, JPMS or its Financial Advisors to reimburse for certain expenses incurred for these events. Providers may also sponsor their own educational conferences or due diligence meetings and only pay for expenses while onsite for the event of Financial Advisors attending these events. JPMS’s policies require that the training or educational portion of these conferences comprises substantially all of the event and such conferences and meetings are subject to review and approval.

Furthermore, JPMS may provide sponsorship opportunities and access to our branch offices and Financial Advisors to such providers for educational, marketing and other promotional efforts. Any payments made by providers could lead Financial Advisors to focus on products managed by these providers when recommending products to clients instead of those from other providers that do not commit similar resources to educational, marketing and other promotional efforts. As a general matter, clients should be aware that the receipt of economic benefits from others, in and of itself, creates a potential conflict of interest.

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Compensation to J.P. Morgan & Affiliates

JPMS is compensated from various sources, as described under the section regarding Brokerage Products and more fully below, in addition to the account fees and transactions costs.

Purchasing J.P. Morgan Affiliated Funds and ETFs and related compensation

JPMS and its affiliates provide a wide range of financial services to various mutual fund companies. Some of these affiliates provide investment management and other services to J.P. Morgan Funds or ETFs, for which those affiliates will benefit from that purchase as a result of receiving investment management fees and other forms of compensation in connection with the operation of such funds, such as shareholder servicing, custody, fund accounting, administration, distribution, securities lending and other services.

Therefore, because JPMS and its affiliates will in the aggregate receive more compensation if you purchase shares in a J.P. Morgan Fund or ETF than if you were to purchase shares in a non–affiliated mutual fund, there is a conflict of interest when JPMS clients purchase J.P. Morgan Funds. The prospectus, descriptive brochure, offering memorandum or similar documents for such products describe these fees and other compensation in detail.

Compensation for Other Services

J.P. Morgan or JPMS’s related persons provide financial, consulting, investment banking, advisory, brokerage (including prime brokerage) and other services to, and receive customary compensation from, an issuer of equity or debt securities that may be held by client accounts. Such compensation could include financial advisory fees, monitoring fees, adviser fees or fees in connection with restructurings or mergers and acquisitions, as well as underwriting or placement fees, financing or commitment fees, trustee fees and brokerage fees.

Bank Sweep Program

JPMS offers clients a bank deposit sweep program option where uninvested cash from investment accounts is swept into FDIC-insured deposit accounts opened with JPMCB by JPMS (“Chase Deposit Sweep”). JPMCB benefits from deposits and credits to your JPMS account(s) that are swept into the Chase Deposit Sweep. For example, JPMCB may use the deposits from the Chase Deposit Sweep to make loans and other investments. The profitability on such lending activities and investments is generally measured by the difference, or “spread,” between the interest rate paid on the deposits and other costs associated with the Chase Deposit Sweep, and the interest rate or other income earned by JPMCB on loans and investments made with the deposits. Therefore, JPMS and JPMCB have a financial incentive in the use of the Chase Deposit Sweep as the primary “sweep” option. Advisors are not compensated on the assets in the sweep programs.

Float Earnings

JPMCB or an affiliate may retain, as compensation for the performance of services, your account's proportionate share of any interest earned on aggregate cash balances held by JPMCB or an affiliate with respect to "assets awaiting investment or other processing." These "assets awaiting investment or other processing" are invested by JPMCB in a number of short–term and long–term investment products and strategies, including without limitation loans to clients and investment securities, though the amount of earnings retained by JPMCB on such assets — known as "float" — due to their short–term nature, is generally considered to be at the prevailing Federal Funds interest rate (a publicly available average rate of all Federal Funds transactions entered into by traders in the Federal Funds market on a given date), less FDIC insurance and other associated costs, if any. "Assets awaiting investment or other processing" for these purposes includes, to the degree applicable, new deposits to the account, including interest and dividends, as well as any uninvested assets held in the account caused by an instruction to purchase and sell securities. JPMCB or an affiliate will generally earn float until such time as such funds may be automatically swept into a sweep vehicle, or otherwise reinvested. "Assets awaiting investment or other processing" may also arise when JPMCB facilitates a distribution from your account. Thus, pursuant to JPMCB's standard processes for check disbursement, cash is generally debited from the account on the date on the face of the check (also called the payable date). Such cash is deposited in a non–interest-bearing omnibus deposit account at JPMCB, where it remains until the earlier of the date the check is presented for payment or the date payment on the check is stopped at your instruction (in which case the underlying funds are returned to the account). JPMCB derives earnings (float) from use of funds that may be held in this manner, as described above.

Principal Trading and Agency Cross Transactions Compensation 

When permitted by applicable law, JPMS may sell securities to you and buy securities from you through our own account as principal and act as agent for you and another client in the same trade without first obtaining your consent. The trading capacity is disclosed to you on the trade confirmation. When we or an affiliate act as principal in buying a security from or selling a security to a client, we earn compensation on the transaction by marking up the price of the security sold to the client and marking down the amount received by the client when selling a security to us. This spread is the firm’s compensation for taking market risk and making a market in the security. 

We have adopted policies and procedures that govern transactions for our principal accounts and the accounts of our employees. These policies and procedures are designed to prevent, among other things, improper or abusive conduct when there is a potential conflict with interests of clients. 

JPMS also has the authority to effect “agency cross” transactions (i.e., transactions for which JPMS or one of its affiliates acts as a broker for both the account and the counterparty to the transaction) when permitted by applicable law. JPMS or its affiliates may receive compensation from each party to the transaction, and for that reason, we will have a potentially conflicting division of loyalties and responsibilities regarding the parties to the transaction. 

Order flow, ECNs, Trading Systems Payments

JPMS may receive payment for order flow in the form of discounts, rebates, reductions of fees or credits. This does not alter JPMS’s policy to route client orders to the market where it believes clients will receive the best execution, taking into account price, reliability, market depth, quality of service, speed and efficiency.

In addition, JPMS may effect trades on behalf of your account(s) through exchanges, electronic communications networks, alternative trading systems and similar execution systems and trading venues (collectively, “Trading Systems”), including Trading Systems in which J.P. Morgan may have a direct or indirect ownership interest. J.P. Morgan may receive indirect proportionate compensation based on its ownership percentage in relation to the transaction fees charged by such Trading Systems in which it has an ownership interest. Please contact your J.P. Morgan representative to request an up–to–date list of all Trading Systems through which we might trade. Such Trading Systems (and the extent of our ownership interest in any Trading System) may change from time to time. 

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Conflicts of Interest & Other Disclosures 

A conflict of interest can be defined as an interest that might incline a broker–dealer or its Financial Advisor to consciously or unconsciously make a recommendation that is not disinterested. J.P. Morgan has adopted policies and procedures reasonably designed to appropriately prevent, limit or mitigate conflicts of interest that may arise between JPMorgan, its Financial Advisors and JPMS and its affiliates. These policies and procedures include information barriers designed to prevent the flow of information between JPMS and certain other affiliates. Certain actual or potential conflicts of interest are described below, while others are described throughout this Guide, particularly those relating to fees and other compensation received by Financial Advisors, JPMS and its affiliates.

A. J.P. Morgan Acting in Multiple Commercial Capacities

J.P. Morgan is a diversified financial services firm that provides a broad range of services and products to its clients and is a major participant in the global currency, equity, commodity, fixed income and other markets in which JPMS client accounts invest. J.P. Morgan is typically entitled to compensation in connection with these activities. In providing services and products to clients other than JPMS’s clients, J.P. Morgan, from time to time, faces conflicts of interest with respect to activities recommended to, or performed for, JPMS clients on one hand and for J.P. Morgan’s other clients on the other hand. J.P. Morgan also advises and represents potential buyers and sellers of businesses worldwide. JPMS client accounts have invested in, and in the future may invest in, such entities represented by J.P. Morgan or with which J.P. Morgan has a banking, advisory or other financial relationship. In addition, certain clients of J.P. Morgan, including JPMS clients, invest in entities in which J.P. Morgan holds an interest, including a J.P. Morgan Fund or J.P. Morgan ETF.

In providing services to its clients and as a participant in global markets, J.P. Morgan, from time to time, recommends or engages in activities that compete with or otherwise adversely affect a JPMS client account or its investments. It should be recognized that such relationships can preclude JPMS’s clients from engaging in certain transactions and can also restrict investment opportunities that would otherwise be available to JPMS clients. J.P. Morgan is often engaged by companies as a financial adviser, or to provide financing or other services in connection with commercial transactions that are potential investment opportunities for JPMS’s clients. J.P. Morgan reserves the right to act for these companies notwithstanding the potential adverse effect on JPMS’s clients. J.P. Morgan derives ancillary benefits from providing investment advice, custody, administration, prime brokerage, transfer agency, fund accounting and shareholder servicing and other services to JPMS’s clients. Providing such services to JPMS’s clients enhances J.P. Morgan’s relationships with various parties, facilitates additional business development and enables J.P. Morgan to obtain additional business and generate additional revenue.

B. J.P. Morgan’s Proprietary Investments

JPMS, J.P. Morgan and any of their directors, partners, officers, agents or employees also buy, sell or trade securities for their own accounts or for the proprietary accounts of JPMS and/or J.P. Morgan. JPMS and/or J.P. Morgan, within their discretion, can make different investment decisions and take other actions with respect to their proprietary accounts than those made for client accounts, including the timing or nature of such investment decisions or actions. Furthermore, JPMS is not required to purchase or sell for any client account securities that it, J.P. Morgan, and any of their employees, principals or agents may purchase or sell for their own accounts or the proprietary accounts of JPMS, or J.P. Morgan. JPMS, J.P. Morgan, and their respective directors, officers and employees face a conflict of interest as they will have income or other incentives to favor their own accounts or the proprietary accounts of JPMS or J.P. Morgan.

C. Investing in Securities in which JPMS or a Related Person Has a Material Financial Interest

JPMS and its related persons may recommend or invest in securities on behalf of its clients that JPMS and its related persons may also purchase or sell. As a result, positions taken by JPMS and its related persons will be the same as or different from, or be made contemporaneously with or at different times than, positions taken for clients of JPMS. As these situations involve actual or potential conflicts of interest, JPMS has adopted policies and procedures relating to personal securities transactions, insider trading and other ethical considerations. These policies and procedures are intended to identify and mitigate actual and perceived conflicts of interest with clients and to resolve such conflicts appropriately if they do occur. The policies and procedures contain provisions regarding pre–clearance of employee trading, reporting requirements and supervisory procedures that are designed to address potential conflicts of interest with respect to the activities and relationships of related persons that might interfere or appear to interfere with making decisions in the best interest of clients, including the prevention of front–running. In addition, JPMS has implemented monitoring systems designed to ensure compliance with these policies and procedures.

D. Other Financial Services Provided by JPMS and its Affiliates

In addition to the services provided by JPMS to its brokerage clients, JPMS and its affiliates provide other financial services to individuals, corporations and municipalities. Those companies provide a wide variety of financial services to each other and third parties to facilitate servicing clients. These services may include, but are not limited to, banking and lending services, sponsorship of deferred compensation and retirement plans, investment banking, securities research, institutional trading services, investment advisory services and executing portfolio securities transaction for funds and other clients. JPMS and its affiliates receive compensation for these services.

E. Transfer of Assets to JPMS

When you transfer assets from another firm to JPMS, including rolling over assets from retirement plans or other accounts, we earn compensation on the assets; please note that we will not earn this compensation if the assets are not transferred to JPMS. We may also earn more, and your Financial Advisor will begin to earn compensation, if your assets are transferred from a You Invest account and placed in a JPMS investment advisory account or a full-service brokerage account, or are used to purchase an annuity through us. Advisors are not compensated on You Invest accounts. Thus, you should be aware that we do have an economic interest in you transferring or rolling over your assets to JPMS. 

F. Allocation

Potential conflicts of interest may arise in the process of allocating securities to full–service brokerage accounts for the purchase of securities that are distributed through syndicate transactions, particularly with regard to some equity IPO securities. JPMS may have an incentive to allocate syndicate securities to certain accounts or clients, particularly in cases where the client demand for the syndicate offering exceeds the supply. For example, JPMS has an incentive to allocate to one account over another account because it may receive more revenue from one account than it does from a similar account. This could incentivize JPMS to allocate opportunities of limited availability to the account that generates more revenue for JPMS.

JPMS has established policies, procedures and practices to manage the conflict described above. JPMS’s syndicate allocation practices are designed such that syndicate allocation decisions are made following established procedures that require consideration of multiple factors and are designed to comply with securities laws and other applicable regulations. Syndicate allocation decisions that may give rise to material actual, potential or perceived conflicts of interest will be identified and escalated for review and resolution.

G. Non–U.S. Investments

International investing involves a greater degree of risk and increased volatility. Changes in currency exchange rates and differences in accounting and taxation policies outside the U.S. can raise or lower returns. Also, the volatility of some non–U.S. markets may be higher due to the instability associated with their local political and economic environments. 

H. Ownership Interest in J.P. Morgan Stock

Certain asset management firms (each, an "asset manager") through their funds and separately managed accounts currently hold a 5% or more ownership interest in J.P. Morgan publicly traded stock. This ownership interest presents a conflict of interest when JPMCB, JPMS, J.P. Morgan Private Investments Inc. and J.P. Morgan (collectively "JPM") recommends or purchases the publicly traded security of the asset manager or the separately managed accounts or funds that are managed or advised by the asset manager. JPM addresses this conflict by disclosing the ownership interest of the asset manager and by subjecting the asset manager’s separately managed accounts and funds to a research process. Additionally, the financial advisers and portfolio managers that may purchase or recommend securities, separately managed accounts and funds of an asset manager that has an ownership interest in J.P. Morgan do not receive any additional compensation for that purchase or recommendation. A fund ownership interest in J.P. Morgan can cause the fund and its affiliates to determine that they are unable to pursue a transaction or the transaction will be limited or the timing altered. J.P. Morgan monitors ownership interests in J.P. Morgan for regulatory purposes and to identify and mitigate actual and perceived conflicts of interest. As of December 31, 2019, both Vanguard and BlackRock hold more than a 5% interest in J.P. Morgan.

I. Non–Traditional Mutual Funds and Exchange-Traded Products

For additional information regarding non–traditional mutual funds and ETPs, please consult with your Financial Advisor or go to www.jpmorgan.com/content/dam/jpm/securities/documents/investing-in-non-traditional-funds.pdf.

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