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JP Morgan Securities: Conflicts of Interest and Regulatory Actions

Securities Lawyer Jonathan Kurta
By: Jonathan Kurta Author
April 6, 2023 at 6:35pm

JP Morgan Securities (CRD #: 79) is both a brokerage and an investment advisory firm with headquarters in New York City, New York. Investors should know that there are 509 disclosures on J.P. Morgan Securities’ records, including fines by the SEC, CFTC, and FINRA.

J.P. Morgan Securities also operates under the following names:

  • Bear, Stearns & Company
  • JP Morgan H&Q
  • JP Morgan Chase
  • J.P. Morgan Wealth Management
  • J.P. Morgan Private Wealth Management
  • J.P. Morgan Private Bank
  • J.P. Morgan
  • Chase Private Client
  • Chase Investments

Can I Sue JP Morgan Securities?

Yes, but your investment contract may have included an agreement that precludes suing the brokerage firm in civil court. Instead, you may be obligated to file a complaint and pursue damages through FINRA arbitration. Securities attorneys can help you navigate the arbitration process and ensure you get a fair settlement.

John Kurta was totally successful at winning a complete settlement for us, obtaining our principal plus interest, as well as having the Brokerage House we sued pay all attorney fees. Very professional and knowledgeable in all aspects of law. Very easy to talk to and very sensitive to the client's needs. Highly recommend using his services!

– Lou Maiolo

Securities Lawyer Jonathan Kurta
Written by: Jonathan Kurta

Jonathan Kurta is an accomplished securities attorney and a founding partner at Kurta Law.

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JP Morgan Securities Brokerage Account Fees

Investors should be aware that brokerage fees differ from advisory fees, which are typically a percentage of the total assets in your account. J.P. Morgan Securities charges the following brokerage account fees:

  • Transaction fees, which may be included in the purchase price of your investment as a markup or markdown.
  • Commissions, which vary depending on the security and whether the trade is self-placed or broker-assisted. Notably, this does not apply to online trades of U.S.-listed equities and exchange-traded funds (ETFs) in self-directed accounts. These types of investments come with different fees. 
  • Options, mutual funds, and ETFs have their own costs. Ask your broker about these fees before you invest. 

You can read the complete description of fees that J.P. Morgan Securities may impose in the firm’s guides to its investment products and services.

JP Morgan Securities Conflicts of Interest

Regulation Best Interest requires brokerage firms to disclose their conflicts of interest to investors in a form called the Customer Relationship Summary (Form CRS). J.P. Morgan Securities’ Form CRS contains the following disclosures:

  • Brokers may recommend proprietary products, for which the firm earns higher compensation.
  • Third parties may compensate and/or provide other benefits to the firm as part of revenue-sharing agreements or for recommending their investment products.
  • Principal trading gives the firm an incentive to execute trades that are in its favor, not yours.
  • The firm may act as underwriter, initial purchaser, or placement agent for certain securities offerings and may receive compensation from the seller/issuer.
  • JP Morgan Securities may also receive compensation for using its own broker-dealer to provide certain investments and services.
  • The firm may receive additional compensation if clients also use the firm’s associated investment banking services.
  • Brokers may receive higher commissions or ongoing fees for certain securities, incentivizing them to recommend these investments.
  • Brokers may receive bonuses for reaching revenue or client asset goals.

Regulatory Actions: SEC, CFTC, and FINRA Fines

Investors should be aware of the most recent regulatory actions filed against J.P. Morgan Securities. Read the full list of regulatory actions in the firm’s detailed BrokerCheck record.

Allegations of Failure to Supervise

In a Letter of Acceptance, Waiver & Consent (AWC) filed on August 4, 2022, FINRA alleged that J.P. Morgan Securities failed to reasonably supervise a broker who engaged in unsuitable, excessive, and unauthorized trading in the account of a senior investor.

FINRA alleged that the firm failed to identify that the broker had increased the client’s concentration in structured notes from 14% to 43% of her liquid net worth within two months. These structured notes allegedly resulted in losses of $5.5 million for the investor.

The broker allegedly also executed at least 100 unauthorized trades, including a $5 million investment in a private equity fund.

FINRA censured J.P. Morgan Securities and the firm consented to a fine of $200,000. An arbitration panel later ordered the firm to pay damages of $9 million.

$1.2 Million SEC Fine

On July 27, 2022, the Securities and Exchange Commission initiated cease-and-desist proceedings against J.P. Morgan Securities. The SEC alleged that the firm failed to establish an adequate written identity theft prevention program, in violation of Regulation S-ID.

Regulation S-ID requires firms to create identity theft programs to verify that clients’ identities have not been stolen and take action when identity theft is suspected.

The firm allegedly failed to identify or appropriately respond to red flags or to update its identity theft programs.

J.P. Morgan Securities was censured, ordered to cease and desist from violations of Regulation S-ID, and fined $1.2 million.

Fine by CFTC

The Commodity Futures Trading Commission alleged that J.P. Morgan Securities failed to report  2,184,520 short-dated Foreign Exchange swap transactions between 2015-2020 under the mistaken belief that these were not required to be reported under CFTC rules.

The CFTC ordered the firm to cease and desist from violations of the Commodity Exchange Act and Commission Regulations, and to pay a fine of $850,000.

What Should I Do if I Lost Money?

Talk to a Securities Attorney today.

Call (877) 600-0098 or email info@kurtalawfirm.com.