A frustrated JP Morgan Securities’ (JPMS) customer completed and submitted a Transfer Initiation Form (TIF) to transfer her full investment account out of JPMS. JPMS approved the transfer and was obligated to faithfully transfer her full account electronically using the Automated Customer Account Transfer Service (ACATS).
During the same time, the customer noticed ‘unauthorized trading’ in her self-directed investment cash account. The customer downloaded and printed her account documents and informed JPMS about the unauthorized trading. This was a breach of contract as JPMS’ agreed to have NO discretion on a self-directed investment account.
The trading apparently occurred at a time (3/18/22) when the customer’s account was frozen pending transfer out of JPMS to another brokerage firm. Many securities showed unauthorized FULL share sales with corresponding losses and wash sales. For example, see the attached images below for only two securities. There are many others securities that were traded and the corresponding losses were added to the customer’s account. Instead of providing a corrected statement and accepting the unauthorized trading activity, JPMS just tampered the statements.
The yellow highlighted trades dated 3/18/22 in the attached images below show the unauthorized transactions and corresponding realized losses added to the customer’s account.
Additionally, the IRS notations such as W (wash sale), C (Covered security), X (missing cost basis) are also seen in the images attached. In a motion to compel hearing filed by the customer to extract discovery documents from JPMS, the attorney representing JPMS in the arbitration accepted the unauthorized trades as ‘open order’. However, she later denied saying that they were open orders and instead said they were transfers. Evidently, the trades show realized losses and IRS notations.
The customer provided the original trading activity statements along with the forged statements to the arbitration panel. The customer also provided a detailed report from the financial industry expert who stated in part…
- “JPMS documents are internally inconsistent and contradictory, resulting in inexplicable and unnecessary confusion for clients, such that the true nature of the activity is unverifiable, opaque and a violation of FINRA Rule 2210(d)(1) and Rule 2210(d)(1)(E).
- JPMS communications to the client constitute a failure to disclose material information accurately to the client, in violation of FIRNA Rule 2210(d)(1) and Rule 2210(d)(1)(E).
- JPMS failed to transfer all cost basis information simultaneously, which led to inaccurate reporting of capital gains.
- JPMS documents concerning account activity – by use of such terms as “acquired/sold” and “realized” short/long term gain/losses, and “proceeds” – reasonably lead a client to conclude that unauthorized trading activity occurred in the account, particularly because such documents contain no notation, footnote or asterisk to indicate anything to the contrary.”
The independently contracted FINRA arbitrators brushed aside the numerous SEC violations committed by JPMS and delivered great injustice. The attorney and expert fees were also denied. The award read in part:
“Although the Panel finds that Respondent made certain errors and mistakes in the record keeping related to Claimant’s account, the Panel does not find that those errors or mistakes resulted in any legally cognizable damages to Claimant.”
