JP Morgan securities (JPMS) customer filed a formal complaint with the Financial Regulatory Authority (FINRA) against JPMS. The blog will share her 18 months journey seeking justice with tangible proofs along with a report from a Finance industry expert detailing the violations committed by JPMS.
The customer first reached out to JPMS customer service to resolve the issues that she was facing with her self directed investment account. The customer’s issues were escalated and various case tickets were created. Nevertheless, the issues were not resolved. Unwillingly, JP Morgan securities provided the internal communications between JPMS staff after TWO motions to compel discovery were filed. These communications showed that even the JPMS staff questioned the accuracy of its book keeping team. Frustrated with poor service and misrepresentation, the customer requested a complete transfer of her JPMS self-directed investment account using Automated Customer Account Transfer Service (ACATS).
FINRA and SEC mandate that when investment accounts is in transition to be transferred to another brokerage firm, all such accounts should be frozen. In essence, no trades are allowed when the investment account is approved to be moved to another firm. Strangely, during the time when the customer’s account was frozen, unauthorized trading activity appeared with corresponding losses and wash sales on the customer’s account statements. When the customer questioned the unauthorized trades, JPMS tampered the account documents and blocked the customer’s online access to her own account.
JPMS was caught red handed because the customer had already printed the original statements and the tampered statements. During the arbitration hearing, the customer provided hard copies of the original statements and the tampered statements including trade summaries that showed the unauthorized trading activity, missing cost basis, partial cash transfer out of the investment account despite the JP Morgan’s Automated Clearing House (ACH) confirmation.
Whenever there is a controversy, people go to a judge to adjudicate the matter with fairness. In this case, the public arbitrators acted as judges and despite seeing the hard copies of original and tampered account documents, the independent contractors that FINRA uses as arbitrators delivered great injustice in their publicly available award.
The award reads 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.
The serious violations committed by JP Morgan Securities were relegated to mistakes and errors, which will plausibly give JPMS a free rein to commit more financial violations and fraud in the future. Mistake and errors are unintentional and when committed, the responsible party accepts its mistakes, apologizes, and remedies the situation. Despite the hard evidence, JPMS totally refused it tampered the statements or engaged in unauthorized trading activity.
The banks and brokerage firms may be relying on the unfair preferential treatment given to them by the independent contractors (i.e., FINRA arbitrators). In such an atmosphere, the customer’s interests will never be protected and injustice will prevail. We need legal system reforms to protect the investors and penalize the fraudulent brokers.
The apparent partiality of the independent contractors (arbitrators) may also protect their own interests. For example, it is plausible that when arbitrators unfairly protect the brokerage firms despite clear evidence of fraud, they are also potentially securing their jobs in the next FINRA proceedings. Lenient sentence may equate to more business for independent contractors (arbitrators).
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