JP Morgan Securities – Big Doesn’t Mean Better
JPMorgan Chase is the largest bank in the United States and the 7th largest in the world. With assets of $2.86 trillion, it certainly is big. It also claims to be one of the oldest financial institutions in the country. But that doesn’t mean its brokerage arm is without problems.
We first wrote about problems in its brokerage business back in 2011. According to its website, JP Morgan is a leader in financial services for consumers. In the year we first wrote about the company, the Financial Industry Regulatory Authority (FINRA), JPChase Morgan accused it of selling junk bonds to its conservative investors.
JPMorgan was sanctioned for making unsuitable recommendations to its customers. According to a news release, the investment banking giant recommended high yield bonds (i.e. junk bonds) to customers seeking conservative investment strategies. High yield bonds are both risky and illiquid making them unsuitable for most investors. FINRA said that some of the company’s financial advisers were recommending floating rate loan funds which are often illiquid meaning they are difficult to sell if you need your money quickly.
FINRA says that Chase failed to properly supervise and train its stockbrokers. Brokers have a duty to understand their customers’ needs including how quickly they need access to their money and their tolerance to risk. Stockbrokers can only recommend investments suitable for their clients’ needs. Selling junk bonds to those wanting low risk or selling illiquid floating rate loan funds to customers who need access to their money in the near term are cler violations.
For its part, JPMorgan Chase neither admitted nor denied the allegations. It will be reimbursing affected customers for their losses, however.
That was in 2011. With hundreds of people in its compliance department, one would think that the company could stay out of trouble. It hasn’t.
Fast forward to last week when FINRA when a JP Morgan Securities rep in Illinois was caught moving $700,000 from 112 customer accounts and moving the funds into a money market account. It wasn’t that the customers lost money or that the broker pocketed the money. instead, FINRA reminded brokers that unless they have been given discretionary authority over a customer’s account, they simply can’t move around a customer’s money because they feel like it.
JP Morgan terminated a rep thought to be behind the illegal transfers. A lawyer familiar withe case, however, believes the young female associate broker took the fall for someone higher up in the company.
Earlier this year a JP Morgan broker was permanently barred from the securities industry after regulators found he attempted to open accounts for an 87 year old woman with dementia. In opening accounts, the broker Steven Jun Lu made. himself beneficiary of 75% of her account. Lu was allowed to accept the ban without admitting guilt.
In 2019, JP Morgan Securities was fined $1.1 million for failing to report 89 allegations of misconduct. When a brokerage firm finds misconduct by one of its representatives or fires someone for misconduct, self reporting regulations require the action immediately be reported to FINRA.
We view the failure to report sanction as extremely serious. FINRA and the SEC rely on voluntary reporting. If a broker is caught stealing, churning customer accounts or engaging in elder financial abuse, regulators need to know in order to protect the public. Not every violation is reported directly to authorities. In fact, in most cases aggrieved investors contact the brokerage firm first.
When a brokerage firm sweeps misconduct under the rug, regulators can’t protect the public or prevent the bad broker from simply moving to another firm.
Did You Lose Money at JP Morgan Securities?
If you lost money to a stockbroker or investment advisor, we may be able to help you get back your money. While no broker can guarantee your investment, brokers are responsible for following “know your customer,” suitability and other special rules. Both they and their employer can be held responsible for your losses if those rules are broken.
For a no obligation review of your case, contact attorney Brian Mahany at (202) 800-9791 or by email at . All calls are confidential. We also invite you to visit or stockbroker malpractice and fraud recovery information page.
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