J.P. Morgan Clearing Corp. (JPMCC) of Brooklyn, New York and J.P. Morgan Securities LLC (JPMS) of New York, New York submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Department of Enforcement of the Financial Industry Regulatory Authority (FINRA) for alleged unsuitable broker activity.
The Suitability Rule (FINRA Rule 2011) is the most fundamental rule brokerage firms and associates must abide by in recommending investments to customers. Brokers must recommend appropriate investments given the customer’s objectives, financial condition, tax status, etc. This rule lays out the three main suitability obligations requiring brokers to (i) perform due diligence to understand the risks of an investment or investment strategy, and determine whether it is suitable for anyone, (ii) have a reasonable basis for believing the investment strategy is suitable for the particular customer based on that customer’s investment profile; and (iii) have a reasonable basis for believing that a series of securities transactions are not excessive (if the broker has control over the account). In the case of JPMCC and JPMS, FINRA found that JPMS failed to send letters to customer accounts confirming changes in their investment objectives.
This is the fourth disciplinary action filed against JPMS in connection with failing to provide information on certain transactions in customer accounts. SEC rules require that firms send confirmation of investment changes to their customers within 30 days of any change. FINRA found that from December 1, 2006 through December 10, 2012, JPMS failed to send confirmation of investment objective changes to a total of 3,266 JPMS Global Wealth Management (GWM) customers within 30 days of the change. Additionally, FINRA found that JPMS failed to provide transaction confirmations to prove bank accounts concerning transitions. Furthermore FINRA found that JPMS failed to “collect and review” certain outside brokerage statements associated with employee accounts. These failures left JPMS to have improper books and records and thereby, the firm violated several Exchange Act, NASDA and FINRA Conduct Rules.
JPMCC was also subject to disciplinary action for not implementing adequate measures to ensure all account holders receive their annual privacy notices. FINRA found that while preparing for its 2014 annual privacy notices, JPMCC discovered it failed to send 2013 privacy notices to some firm customers. While measures were taken to ensure this event wouldn’t reoccur, FINRA found JPMCC violated Regulation S-P of the Securities Exchange Act of 1934 nonetheless. Without admitting or denying the FINRA allegations, JPMCC and JPMS agreed to the sanctions. JPMS was ordered to pay a $775,000 fine and JPMCC was ordered to pay a $250,000 fine.
Have you suffered losses in your J.P. Morgan account due to an unsuitable investment? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce is accepting clients with valid claims against J.P. Morgan and others stockbrokers for unsuitable recommendations, failure to do due diligence, and/or other misconduct.
The most important of investors’ rights is the right to be informed! This Investors’ Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 35 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities, and investment law issues. The lawyers at our law firm are devoted to protecting investors’ rights throughout the United States and internationally! Please post a comment, call (800) 732-2889, send Mr. Pearce an email at firstname.lastname@example.org, and/or visit our website at www.secatty.com for answers to any of your questions about this blog post and/or any related matter.