INVESTIGATED FOR INAPPROPRIATE HANDLING OF PERSONAL FINANCES IN VIOLATION OF PARENT COMPANY'S CODE OF CONDUCT
As recent headlines disclose, Too-Big-To-Fail financial institutions have been charged with and pleaded guilty to all sorts of financial shenanigans involving fraudulent mortgages and bogus account openings. Do you recall anyone from any C-Suite being suspended by FINRA for such conduct? Do you recall any bank or brokerage firm being suspended from accepting new customers or required to cease trading on a specific desk as a result of any marketplace misconduct? We got a lot of small-fry getting cooked but the big-fish are left to frolic in the ocean.Finally, let me pose these questions:
If DeBow's alleged check-kiting scheme did not involve a FINRA member firm's affiliated bank's checking account, do you think the self-regulatory organization would have proposed charges?If FINRA initiates regulatory action only when an associated person engages in NSF activity in a member firm's affiliated bank, does that transform FINRA from a regulator into a questionable collection agency (or the threat of one) for its member firms?Does FINRA routinely and regularly review the checking activity of its own employees and, if so, does the self-regulatory organization fine and suspend its employees when they engage in check kiting?
Securities products and services are offered by registered representatives of J.P. Morgan Institutional Investments Inc. Member FINRA/SIPC. JPMorgan Invest Holdings LLC, JPMorgan Chase Bank, N.A., and J.P. Morgan Institutional Investments Inc. are affiliates of JPMorgan Chase & Co.
A. General Description of Advisory Firm This Brochure relates to the investment advisory services offered by J.P. Morgan Investment Management Inc. ("JPMIM" or the "Adviser"), which is the primary U.S. investment advisory branch of J.P. Morgan Asset Management ("JPMAM"). JPMAM is the marketing name for the asset management businesses of JPMorgan Chase & Co. ("JPMC"), a publicly traded company, and its affiliates worldwide. JPMIM is wholly-owned by JPMorgan Asset Management Holdings Inc., which is a subsidiary of JPMC. JPMIM was incorporated in Delaware on February 7, 1984. JPMIM is registered with the SEC as an investment adviser pursuant to the Investment Advisers Act of 1940, as amended (the "Advisers Act").
In accordance with the terms of the SEC settlement, J.P. Morgan Investment Management agreed to pay $662,763 disgorgement, $56,758.40 interest, and a $364,689 penalty. JPMorgan Chase Bank Settlement In "Manhattan U.S. Attorney Settles Lending Discrimination Suit Against JPMorgan Chase For $53 Million /Settlement Includes Admissions by the Bank and Provides Compensation for Borrowers Harmed by the Discriminatory Lending Practices") (Press Release, United States Department of Justice, United States Attorney for the Southern District of New York, 17-019, February 20, 2017), the Department of Justice ("DOJ") announced the settlement of a civil rights lawsuit against JPMorgan Chase Bank, N.A. As set forth in the Press Release:1. These proceedings arise out of violations of Rule 105 of Regulation M of the Exchange Act by JPMIM, a New York-based registered investment adviser. Rule 105 prohibits selling short an equity security that is the subject of certain public offerings and purchasing the offered security from an underwriter or broker or dealer participating in the offering, if such short sale was effected during the restricted period as defined therein.2. On ten occasions, from October 2009 through September 2012, JPMIM bought offering shares from an underwriter or broker or dealer participating in a follow-on public offering after having sold short the same security during the restricted period. These violations collectively resulted in profits of $662,763.
According to the stipulation of fact agreed to by the parties in the Consent Order, filed in federal court in Manhattan:
To compensate the estimated 50,000 African-American and Hispanic borrowers who paid higher rates and fees than similarly situated white borrowers, CHASE has agreed to create a settlement fund in the amount of approximately $53 million . . .
- Prior to January 2006 and continuing until early 2009, Chase originated and funded residential mortgage loans through a wholesale channel. Applications for these loans were brought to Chase by thousands of independent mortgage brokers throughout the United States who had entered into contracts with Chase for the purpose of bringing mortgage loan applications to it for origination and funding.
- From 2006 to 2009, approximately 360,000 wholesale mortgage loans were sourced by these independent brokers and brought to Chase. Of these, Chase reported that approximately 40,000 wholesale loans were made to African-American borrowers and that approximately 66,000 wholesale loans were made to Hispanic borrowers. Chase closed its wholesale channel in 2009.
- The government's data model projects that, from at least 2006 through late 2009, certain of the approximately 106,000 African-American and Hispanic borrowers who obtained loans through independent mortgage brokers participating in Chase's wholesale channel paid higher rates and fees on "wholesale" home mortgage loans compared to the rates and fees paid by similarly situated white borrowers who obtained loans through independent mortgage brokers participating in Chase's wholesale channel. It projects that in thousands of instances, an African-American borrower entering into the same type of Chase wholesale mortgage as a white borrower paid higher loan rates and larger fees than such white borrower. Similarly, it projects that in thousands of instances, a Hispanic borrower entering into the same type of Chase wholesale mortgage as a white borrower paid higher loan rates and larger fees than such white borrower.
FINRA 2010. Standards of Commercial Honor and Principles of TradeA member, in the conduct of its business, shall observe high standards of commercial honor and just and equitable principles of trade.
Will FINRA now investigate whether any of the 106,000 African-American and Hispanic borrowers allegedly defrauded by J.P. Morgan Chase Bank also maintained a securities account with a J.P. Morgan FINRA member firm?Will FINRA consider whether the continued affiliation of any JP Morgan FINRA-member-firm with its banking affiliate is consistent with the self-regulatory organization's standards of honor and its trade principles?Is there a double standard at FINRA when it comes to the transgressions of its larger and smaller firms -- and of the individual associated persons who fall under its jurisdiction?
"J.P. Morgan Securities" is a marketing name for a wealth management business conducted by JPMorgan Chase & Co. and certain subsidiaries. J.P. Morgan Securities offers investment products, services, Clearing and Custody through J.P. Morgan Securities LLC, a member of FINRA and SIPC. Bank products and services are offered by JPMorgan Chase Bank, N.A. and its bank affiliates.
"Selling the Home Brand: A Look Inside an Elite JPMorgan Unit" (New York Times, DealBook, Marc 2, 2013):
The bank, Mr. Burris's bosses explained, examines the amount of JPMorgan-branded portfolios of mutual funds that brokers sell. "If you look at our firm, 50 percent of all our sales go" to those investments, Mr. Haigis said. Furthermore, he said, such products draw less scrutiny from the Financial Industry Regulatory Authority, which polices Wall Street.
"FINRA and JPMorgan go after whistleblower for $624 (not a typo) loss" (Financialplanning.com, September 22, 2016):
Now an independent RIA, Burris runs Burris Wealth Management in Surprise, Arizona, and serves mainly elderly clients. Two years after he initiated his OSHA whistleblower case, Burris says he got a got a call from Margery Shanoff, a FINRA enforcement attorney, in the spring of last year.Burris said she told him that FINRA had completed a thorough investigation into his activities at JPMorgan."You are in big trouble," he recalls Shanoff telling him.Burris said he asked how that could be, given that no one had called to get his side of the story. Shanoff did not respond to a request for her description of the conversation.