Trust is the Cornerstone of the Financial Industry. Is your Brokerage Firm Trustworthy?
A customer holding a self-directed cash investment account at JP Morgan Securities (JPMS) encountered the following issues. Do you think these actions constitute Fraud or Errors?
- Unauthorized trading activity of full shares of common stock was seen in the original (untampered) transaction history statements.
- Unauthorized trading activity of full shares was seen in original (untampered) individual stock gain/loss summary statements.
- Unauthorized trading activity also showed the corresponding IRS notations such as W (to represent wash sales), which meant that the customer incurred disallowed realized losses from the unauthorized trades; C (to represent covered security); and X (to represent missing cost basis, although the securities were purchased at JPMS).
- Realized losses from unauthorized trades were also added to the customer’s account according to the original (untampered) statements.
- The attorney representing JPMS said that the trades in question (unauthorized trades) were “open orders”. The customer notified the arbitrators that there were no open orders to sell securities. Even otherwise, per FINRA regulations, the investment account is frozen, and all open orders are cancelled during transition to another brokerage firm. JP Morgan Securities later went back on its statement of “open orders” and said that the trades in question (unauthorized trades) did not occur at all.
- Account documents were tampered/changed when customer confronted JPMS about unauthorized transactions.
- Customer’s online access to the self-directed investment account was blocked when the customer inquired about the account inconsistencies and discrepancies.
- The realized gain/loss information is missing from the monthly statements of many stocks traded at JP Morgan Securities.
- The cost basis for many of the securities purchased at JP Morgan Securities is missing from the monthly statements.
- Customer’s investment account was not transferred completely and timely to the next brokerage firm even though JP Morgan Securities approved full account transfer using ACATS system.
- Customer was charged the full account transfer fee but JP Morgan Securities failed to transfer the investment account completely and timely.
- JP Morgan Securities transferred partial cash (1/4th) of the total cash withdrawn by the customer from the investment account. JP Morgan Securities provided three written confirmations for the full cash transfer including ACH confirmation.
- The withdrawal and deposit history were deleted from the online investment account, following the customer’s complaint about the partial transfer of funds.
- JP Morgan Securities withheld discovery documents necessitating two motions to compel discovery before the arbitration panel.
- The arbitrators, who are independent contractors, and not FINRA employees watered down the above listed misconduct as errors and mistakes. The independent contractors have a conflict of interest. Since the arbitration awards are public, any negative judgments against the brokerage firm could potentially harm the business interests of the independent contractors. FINRA and SEC should carefully reassess the arbitration process to ensure fairness in the arbitration proceedings.
SEC already fined JP Morgan Securities $125 Million for withholding discovery documents and record keeping failures. The order in part says:
“JPMS acknowledged that its recordkeeping failures deprived the SEC staff of timely access to evidence and potential sources of information for extended periods of time and in some instances permanently. As such, the firm’s actions meaningfully impacted the SEC’s ability to investigate potential violations of the federal securities laws.” https://www.sec.gov/news/press-release/2021-262
JP Morgan Chase Paid $38 Billion in Fines for Banking, Securities, and Other Violations.
In addition to the $38,995,000,000 previously fined, JP Morgan Securities was yet again fined almost $350 million in March, 2024 and $18 million in January 2024.