The Financial Industry Regulatory Authority (FINRA) recently expelled a J.P. Morgan Securities broker based in San Jose, California, for engaging in a fraudulent scheme to sell customer information to an accomplice between December 18, 2012, and January 22, 2013. The accomplice used the customer account numbers and signature cards to make unauthorized withdrawals from 10 customers that had accounts with J.P. Morgan’s affiliated bank J.P. Morgan Chase Bank. As part of a settlement reached with FINRA, the broker involved in the scheme agreed to be barred from associating with any FINRA member broker-dealer in any capacity.
On November 15, 2011 the Financial Industry Regulatory Authority (FINRA) entered into a settlement with J.P. Morgan Chase who consented to a fine of $1.7 million and agreed to reimburse customers in the amount of $1.9 million in connection with the failure to supervise unsuitable recommendations to invest in unit investment trusts (UITs) and floating-rate funds given to unsophisticated investors who had a conservative risk tolerance and little or no investment experience. FINRA further found that firm’s brokers made the recommendations absent any reasonable grounds to suggest they were suitable for the affected investors.
“Chase allowed its brokers to sell risky UITs and floating-rate loan funds without providing them with the training, guidance and supervision necessary to determine whether these products were suitable for their customers, which resulted in losses for Chase’s customers,” said Brad Bennet, FINRA Executive Vice President and Chief of Enforcement.
FINRA found that 260 unsuitable recommendations were made with regard UITs resulting in $1.4 million in losses to customers. Unreimbursed losses to customers based on unsuitable recommendations from brokers to purchase the floating-rate funds totaled $500,000.