The First Hand Experience of a JP Morgan’s Customer
This blog will detail the customer’s first-hand experience, her assessment, and opinion about JP Morgan Securities’ lack of transparency and unsatisfactory customer support during the time she invested with JPMS. She later filed a complaint against JP Morgan Securities before the Financial Industry Regulatory Authority (FINRA). The information provided here is for informational purposes only.
The client owned multiple Chase bank accounts for over 19 years before opening a self-directed cash investment account with JP Morgan securities (JPMS; CRD#: 79). JPMS is a broker-dealer subsidiary of JPMorgan Chase & Co. JPMS sends advertisements through emails and postal mail soliciting customers to open an investment account. The customer also received such advertisements and finally opened an investment account with JPMS. She traded using JP Morgan securities online portal and JPMS application for approximately 14 months. She had the absolute WORST experience with JP Morgan securities and wants to caution others to be wary of JPMS.
JP Morgan Securities provided inconsistent and contradictory statements to a customers after she uncovered unauthorized trading activity in her self-directed non-discretionary cash investment account. The customer did not give any authority to JP Morgan securities to trade securities in her account. The unauthorized trading resulted in realized losses, which were added to her investment account by JPMS.
JP Morgan Securities Did Not Honor The Customer’s Requests In a Timely Manner Against its own Policies
The customer sent numerous messages and called multiple times to change her default liquidation method. Despite, clear written and verbal messages, the phone and online JP Morgan securities representatives did not honor her requests to change her default liquidation method in a timely manner. The customer was told that her request will take effect in 24 hours, yet JPMS took over 12 days to finally honor her request. The customer was neither given an option to change the liquidation method online nor JPMS app allowed the customer to choose the tax lots. Frustrated, the customer opened an investment account with a different brokerage firm.
JPMS Did Not Disclose Material Fact on Welcome Email Letter and Prospectus
The JPMS mobile website and chase application DOESNOT allow customers to select specific tax lots while trading. Only a desktop computer allows for specific tax lots to be selected during trade. JPMS omitted this important material fact in the prospectus and welcome email letter.
JPMS claimed on the welcome email letter that
“…Our focus is solely on getting the best outcome for you, the investor, and that means fast, reliable, efficient executions of your trades. And if you haven’t already, you’ll see how easy it is to build a diversified, custom portfolio and manage everything online or through the Chase Mobile® app1.
Online Cash Withdrawal Transaction Gone Awry
The customer withdrew cash out of her ‘available cash to withdraw’ using the automatic clearing house (ACH) option provided by JPMS. She received ACH withdrawal confirmation that showed transfer status as confirmed for entire amount withdrawn. Despite receiving multiple written confirmations from JP Morgan securities that the full cash was deposited to the checking account, only 1/4th of the cash has been deposited to date. The customer called for an inquiry and a case ticket was created to investigate the matter.
The case ticket investigation conducted by JPMS determined that the complete amount was transferred. JPMS’ employees conducting the investigation were confused themselves. One JPMS’ employee questioned the accuracy of the JPMS ‘book keeping’ team. To be clear, there was no human involvement when the money was withdrawn by the customer, therefore, there was no human error involved. The money was withdrawn using the online portal.
In a cash account, if an investor has $100 to withdraw as shown in the ‘available cash to withdraw’, he/she cannot withdraw $100.01. If an investor tries to withdraw even ‘one cent’ more than what is available to withdraw, an error message states: ‘you do not have enough funds to withdraw’ and the transaction is not allowed. However, in this case, her full transaction was processed and multiple messages were sent to her to confirm her withdrawal.
Frustrated Customer Requested her Complete Account to be Transferred Out of JP Morgan Securities Using ACATS
The customer decided to move her complete investment account to another brokerage firm through the Automated Customer Account Transfer Service (ACATS). JPMS approved the request. Intriguingly, during the period when the customer’ account was frozen pending transfer to the next brokerage firm, JPMS’ statements showed that an unauthorized trading occurred where many FULL shares of multiple securities were traded without the customer’s consent or knowledge. Trading in a non-discretionary account is a breach of contract. As a result of the questionable trades, the customer incurred realized losses and wash sales. The client printed the account statements showing unauthorized trading activity and contacted JPMS to inquire how could JPMS take discretion of a non-discretionary account, which is a breach of brokerage agreement.
Instead of providing an explanation about the unauthorized trading as seen on the statements, JP Morgan securities denied making any trades and just altered the customer’s account statements such that unauthorized full share sales of multiple securities in question were deleted and the total dollar value of the investment account was also changed.
FINRA Complaint
The customer filed a formal complaint with FINRA against JP Morgan securities alleging dishonest practices, misconduct, and fraud. SEC rules mandate that the brokerage account statements must be in an unalterable WORM (write once, read many) format. The customer printed the original statements and informed JPMS’ representatives about her account statements showing unauthorized trading activity along with realized losses from those traders added to the account. Instead of providing any explanation, JPMS altered the customer’s account statements. The altered statements did not say ‘corrected statement’. The tampered statements were inconsistent with the original statements. The total account value, total gain/loss was also different in both statements. In response,JP Morgan securities blocked the customer’s access to her own investment account.
Withholding Evidence After Receiving Multiple Subpoenas
The customer sent three discovery requests to JPMS to gain access to her account. JPMS objected to providing important documents. Eventually, the customer filed her first motion to compel JPMS to provide her account documents. Despite the arbitration panel’s clear orders, JPMS withheld important documents in violation of FINRA rules. The customer filed the second motion to compel JPMS to produce all withheld documents. Both motions to compel were heard by the full panel and JPMS was ordered to provide the requested documents. Strangely, JPMS was not sanctioned by the arbitration panel for not following the arbitration panel’s clear orders for which a second motion to compel had to be filed and heard. The next set of documents produced, after the second motion to compel was filed, provided substantial proof against JPMS misconduct and discredited its defense.
Report by Security Industry Expert About JP Morgan Securities Conduct
The security industry expert hired for this case wrote in her report, in part, after examining the customer’s account documents and discovery produced by JPMS that
"... Indeed, service ticket notes authored by JPMS associated persons discussing the discrepancy appeared to suggest that not even the associated persons could explain the discrepancy and created more questions than answers, including a suggestion that JMPS had a books and records policy violation. It is worth noting that the suggestion of a books and records policy violation did not appear to be escalated to compliance.”
Despite all proof, JPMS got away without paying any damages to the customer. FINRA hires independent contractors as arbitrators who may be biased towards brokers to avoid being rejected by brokers in their next arbitration case. In this case, the arbitrators watered down the numerous serious violations despite accepting that JPMS committed ‘errors and mistake’ in the customer’s account.
Any reasonable person knows that unauthorized trading, tampering of statements to cover up, inconsistent statements, adding realized losses to the customer’s account, and breach of brokerage agreement are not random ‘mistakes and errors’. Even otherwise, a bank cannot make errors and mistakes because it deals with people’s hard earned money.
To protect customers from fraudulent brokers, FINRA and SEC should remove the arbitration clause from the brokerage agreement so the brokers know they cannot hide their misconduct behind the arbitration clause, where they apparently get a favorable judgement from independent contractors. The customer also calls for legal reforms to hold fraudulent brokers accountable rather than letting them hide their misconduct behind the arbitration clause.
Pro se customer can call PIABA to get help from attorneys who may work on a contingency basis. The customer consulted with Attorney Alex Rogers. Alex is highly reliable and one the best.
https://jpmorganreviews.com/is-the-customers-data-housed-with-brokers-protected
