Conflicts of interest will arise whenever J.P. Morgan Chase & Co. or any of its affiliates (together, "J.P. Morgan") has an actual or perceived economic or other incentive in its management of clients’ portfolios to act in a way that benefits J.P. Morgan. Conflicts will result, for example (to the extent the following activities are permitted in the account): 1) When J.P. Morgan invests in an investment product, such as a mutual fund, exchange-traded fund (ETF), structured product, separately-managed account or hedge fund issued or managed by an affiliate, such as J.P. Morgan Investment Management Inc. (“JPMIM”), 2) When a J.P. Morgan entity obtains services, including trade execution and trade clearing from an affiliate, 3) When J.P. Morgan receives payment as a result of purchasing an investment product for a client’s account or 4) When J.P. Morgan receives payment for providing services (including shareholder servicing, recordkeeping or custody) with respect to investment products purchased for a client’s portfolio. Other conflicts will result because of relationships that J.P. Morgan has with other clients or when J.P. Morgan acts for its own account.
When selecting ETFs for this program, the portfolio manager limits its selection to J.P. Morgan ETFs. As a result, this program’s portfolio manager will choose J.P. Morgan ETFs even in cases where there are third-party ETFs that are less expensive, or that have longer track records or superior historical returns. J.P. Morgan has a conflict of interest when it determines the portfolio’s target asset classes, asset allocation goals or ongoing allocations, because it will allocate only to asset classes where J.P. Morgan ETFs are available.
The client’s portfolio will contain 100% J.P. Morgan ETFs. You should not invest in this program if you are not comfortable holding an investment portfolio that is comprised of 100% J.P. Morgan ETFs. It is important to note that J.P. Morgan will receive more overall fees when J.P. Morgan ETFs are used. Additionally, the J.P. Morgan ETFs in this program are not required to be reviewed or approved by the research process applicable to other programs for which J.P. Morgan Securities LLC (“JPMS”) serves as an investment adviser. Consequently, investment decisions regarding J.P. Morgan ETFs for the program will be different from, and may, in certain circumstances, be inconsistent with, the investment decisions made by J.P. Morgan for other advisory programs. Furthermore, the J.P. Morgan ETFs used in this program may or may not be approved for solicitation in the JPMS full-service brokerage platform.
JPMIM or its affiliates may be sponsors or managers of ETFs and other registered funds (“J.P. Morgan Funds”) that J.P. Morgan purchases for the client’s portfolio. In such a case, JPMIM or its affiliates receive a fee for managing the J.P. Morgan Funds. Because fees paid to JPMIM and its affiliates will be offset against the advisory account fee, J.P. Morgan will keep no more revenue when the client’s portfolio is invested in J.P. Morgan Funds than when it is invested in third-party funds.
All funds have various internal fees and other expenses that are paid by managers or issuers of the funds or by the fund itself, but that ultimately are borne by the investor. J.P. Morgan may receive administrative and servicing and other fees for providing services to both J.P. Morgan Funds and third-party funds, if applicable, that are held in the client’s portfolio. These payments may be made by sponsors of funds (including affiliates of JPMIM) or by the funds themselves and may be based on the value of the funds in the client’s portfolio. Funds or their sponsors may have other business relationships with J.P. Morgan outside of its portfolio management role or with the broker-dealer affiliates of J.P. Morgan, which may provide brokerage or other services that pay commissions, fees and other compensation.
J.P. Morgan has an incentive to allocate assets to new J.P. Morgan Funds to help develop new investment strategies and products. J.P. Morgan has an incentive to allocate assets of the portfolios to a J.P. Morgan Fund that is small, pays greater fees to J.P. Morgan affiliates or to which J.P. Morgan has provided seed capital. In addition, J.P. Morgan has an incentive not to sell or withdraw portfolio assets from a J.P. Morgan Fund to avoid or delay the sale or withdrawal’s adverse impact on the fund. Accounts managed by J.P. Morgan have significant ownership in certain J.P. Morgan Funds. J.P. Morgan faces conflicts of interest when considering the effect of sales or redemptions on such funds and on other fund shareholders in deciding whether and when to redeem its shares. A large sale or redemption of shares by J.P. Morgan acting on behalf of its clients could result in the underlying J.P. Morgan Fund selling securities when it otherwise would not have done so, potentially increasing transaction costs and adversely affecting fund performance. A large sale or redemption could also significantly reduce the assets of the fund, causing decreased liquidity and, depending on any applicable expense caps, a higher expense ratio or liquidation of the fund. These conflicts may be heightened by the collaboration of this program’s portfolio manager with the portfolio managers of the J.P. Morgan Funds in designing portfolios for this program. J.P. Morgan has policies and controls in place to govern and monitor its activities and processes for identifying and managing conflicts of interest.
Please review the JPMS (PDF) and JPMIM (PDF) disclosure brochures for additional important information regarding this program and its conflicts of interest.