Today's FINRA regulatory case started with a credit card. Then there was a protest by the card-holder, an associated person of FINRA member firm J.P. Morgan Securities. Then there was an in-house investigation. Then you got some whoppers of excuses as to why the charges weren't the employee's. Then we have the end of an employment relationship. Then we have a regulatory settlement. And then, BrokeAndBroker.com Blog's Bill Singer goes off on a tirade.Case In Point For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, William L. Olsen submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of William L. Olsen, Respondent (AWC 2015048316801, March 9, 2017).The AWC asserts that in 2010, Olsen entered the securities industry and by October 2012, he was registered with FINRA member firm J.P. Morgan Securities LLC. During his association with J.P. Morgan Securities, Olsen was also an employee at what the AWC refers to as "JPMS's bank affiliate." The Lost WalletThe AWC asserts that sometime around August 17, 2015, Olsen contacted a credit-card issuer, which was apparently an affiliated business of J.P. Morgan Securities because the AWC refers to the issuer only as "JPMS affiliate." Apparently, during his communication with the JPMS affiliate credit-card issuer, Olsen "claimed that several recent charges were fraudulent because he had lost his wallet during the timeframe when the charges were incurred." In early October 2015, Olsen purportedly spoke with the issuer's security division and "claimed he had never been at the location where the charges were incurred."Forgery Forensics What can I tell ya? You either believe Olsen or you don't. I am a skeptic by nature and profession, so, I am not buying the lost wallet story. That being said, the JPMS-affiliate-issuer apparently did some forensics on the signatures on Olsen's bank card and those on his disputed credit card receipts and determined that they had "matched." In response, Olsen claimed that "someone must have forged his signature." Internal InvestigationThe AWC asserts that after determining that there had not been any forged credit card signatures, "JPMS's parent company" internally investigated Olsen's fraud claims:
[O]n or about November 5, 2015, when he was interviewed as part of that investigation, Olsen abandoned his stolen-wallet and forgery claims. Instead, Olsen claimed that someone must have drugged him before the disputed charges were incurred, because he had no memory of the 15-hour period during which the charges were incurred. Therefore, Olsen claimed, he could neither confirm nor deny that he made any of the disputed charges. Olsen had no plausible basis for claiming that someone had drugged him. Moreover, Olsen knew that he had been at the location where the charges were incurred and that he, in fact, had authorized the charges at issue. JPMS and its bank affiliate terminated Olsen in early December 2015 after concluding that both his initial fraud claim and his subsequent alternative explanations during the internal investigation were false.Discharged Online FINRA BrokerCheck files as of March 17, 2017, assert that FINRA member firm JP Morgan Securities "Discharged" Olsen on December 3, 2015, based upon allegations that:
NON SECURITIES RELATED. REGISTERED REP FILED FALSE CLAIMS ON HER [sic] PERSONAL CHASE CREDIT CARDS
Sanctions FINRA deemed Olsen's conduct to constitute a violation of FINRA Rule 2010. In accordance with the terms of the AWC, FINRA imposed upon him a $10,000 fine and a six-month-suspension from association with any FINRA member in any capacity.
What I want FINRA to comprehend is that it has a role to play as a disinterested industry regulator. It can't be in the business of helping its member firms get paid for bounced bank checks or disputed credit card charges. We have courts for such matters. Those who fail to pay their bona fide debts always face the threats of criminal and civil charges. We don't need to deflect the limited resources of FINRA away from protecting public investors. Which is not to say that those who engage in conduct such as that presented in the Olsen AWC should be unleashed on the public. Nor is it to suggest that such fraudsters ought not be weeded out of the FINRA member firm community. Keep in mind, however, that FINRA's response to Olsen's alleged misconduct was to simply charge him a $10,000 fine and put him on the shelf for six months. Finally, let's remember that only a few years ago, on January 7, 2014, former United States Attorney Preet Bharara had this to say about JPMorgan Chase Bank's agreement to pay $1.7 billion to victims of Bernard Madoff's fraud (the largest-ever bank forfeiture and penalty paid at the time):
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.
Bank products and services are offered through JPMorgan Chase Bank, N.A. and its affiliates. Securities are offered by J.P. Morgan Securities LLC and Clearing and Custody by J.P. Morgan Clearing Corp., both are members of FINRA and SIPC. J.P. Morgan Securities LLC and J.P. Morgan Clearing Corp are affiliates of JPMorgan Chase Bank, N.A.
Today, the largest financial institution in the country stands charged with two criminal offenses. Institutions, not just individuals, have an obligation to follow the law and to police themselves. They must exercise due care not only with their own money but with other people's money also. In this case, JPMorgan connected the dots when it mattered to its own profit, but was not so diligent otherwise. Fortunately, with today's resolution, the bank has accepted responsibility and agreed to continue reforming its anti-money laundering practices. Most importantly, the victims of Bernie Madoff's epic fraud are $1.7 billion closer to being made whole.Manhattan U.S. Attorney And FBI Assistant Director-In-Charge Announce Filing Of Criminal Charges Against And Deferred Prosecution Agreement With JPMorgan Chase Bank, N.A., In Connection With Bernard L. Madoff's Multi-Billion Dollar Ponzi Scheme / JPMorgan Criminally Charged With Two Violations Of The Bank Secrecy Act / Charges to Be Deferred for Two Years Under an Agreement Requiring JPMorgan to Admit to Its Conduct; Pay $1.7 Billion to Victims of Madoff's Fraud; and to Reform Its Anti-Money Laundering Policies / $1.7 Billion Payment by JPMorgan is the Largest Ever Bank Forfeiture and Department of Justice Penalty for a Bank Secrecy Act Violation (United States Attorney/Department of Justice Press Release, January 7, 2014). How did Bharara put it? Oh, yes, "JPMorgan connected the dots when it mattered to its own profit, but was not so diligent otherwise." Seems a potent admonition today as well -- and one that FINRA would do well to take due note of. By the way, having shown such diligence in going after Mr. Olsen, just what action did FINRA take against J.P. Morgan Securities for the transgressions of its parent (should we dare name the name here?). Oh, yeah, I forgot, in 2016, FINRA named JP Morgan Chase & Co.'s Stephen M. Cutler to its Board of Governors. Also READ: FINRA's JP Morgan Challenge: Will The Self Regulator End Its Hypocrisy? (BrokeAndBroker.com Blog, January 24, 2017)