March 21, 2022
Sometimes, something just doesn't sit right with you. You know what I'm saying, right? It's one of those things where you completely understand and agree with a regulator's actions, but . . . and it's that "but" that gives you pause. In today's blog, we have one of those "but" moments.
12 Purchases on 8 Date on 4 Chase Bank Credit Cards
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, Sevaag Matossian submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted.
In the Matter of Sevaag Matossian, Respondent (FINRA AWC 2021071593301)
The AWC asserts that Sevaag Matossian was first registered in 2015 with J.P. Morgan Securities LLC. ("JPMS"). As alleged in part in the AWC:
Between September 2020 and March 2021, on eight separate dates, while associated with JPMS and employed by its affiliate JPMorgan Chase Bank, N.A. (Chase Bank"), Matossian and his wife used four separate personal Chase Bank credit cards in Matossian's name to make twelve purchases at retailers and restaurants totaling $2,639.64. Despite the fact that each transaction was authorized, Matossian claimed he was not responsible for paying the charges. He falsely reported the charges as fraudulent to Chase Bank, claiming that certain cards were lost or not yet received and other charges were not made by Matossian or his wife.
Online FINRA BrokerCheck disclosures as of March 21, 2022, disclose that JPMorgan Chase Bank, N.A. "discharged" Matossian on May 26, 2021 based upon allegations that:
Terminated by affiliate bank - non securities related. Registered Rep admitted to
submitting fraudulent claims on his personal affiliate bank credit card for legitimate
In accordance with the terms of the AWC, FINRA found that Matossian violated FINRA Rule 2010; and the regulator imposed upon him a Bar from associating with any FINRA member in all capacities.
Bill Singer's Comment
I misunderstood this case the first two times that I had read it. I thought that FINRA had barred Matossian because he had submitted the $2,639.64 in charges as "business expenses" rather than "personal expenses." Is that how you read it too? Hey, welcome to the club!
Matossian had four different personal Chase Bank credit cards; however, nothing that Matossian and/or his wife charged against those cards involved an effort to get his employer, FINRA member firm JP Morgan Securities, to pay for "personal" expenses as if they were reimbursable "business" expenses. What seems to have happened here is that at some point(s) in time, Matossian declined to honor the 12 Chase Bank credit card charges claiming that "he was not responsible for paying the charges." As to what prompted Matossian to claim that the charges were not bona fide is explained briefly in the AWC: "He falsely reported the charges as fraudulent
to Chase Bank, claiming that certain cards were lost or not yet received and other charges
were not made by Matossian or his wife." Did Matossian eventually pay for the disputed charges? We're not told in the AWC.
If there is an aspect of this AWC that troubles me, it's the unsettling issue of a self-regulatory-organization acting in a pseudo-role of bill collector for its members and/or their subsidieary/parent affiliates. The facts in the Matossian AWC are such that I take NO EXCEPTION whatsoever to FINRA's investigation and settlement. I can't be clearer as to that position, so please re-read the prior sentence to make sure that we're on the same page. With that predicate firmly in place, join me on a what-if journey.
What if, instead of having a banking account at JPMorgan Chase Bank, N.A. (the affiliate of the FINRA member firm JPMS) Matossian had a bank account with unaffiliated XYZ Bank. Let's assume that all the substantive facts are the same; namely, that Matossian and his wife ran up 12 charges over six months on four XYZ Bank credit cards and then declined to pay XYZ Bank's bill because the couple argued that some of the cards had been lost, some had not been received, and some charges were not made by them -- and, for good measure, let's also take the AWC's characterization that the reasons for declination were false reports.
Okay, so, now what?
In our what-if example, XYZ Bank is not the parent or an affiliate of JPMS -- so, on what basis would JPMS terminate Matossian? Would JPMS have simply shrugged and let the non-affiliated bank and Matossian work things out?
Let's consider another what-if scenario:
Imagine that Matossian and his wife went to Olive Garden and spent $2,639.64. When the bill was presented to them, the couple refused to pay saying that they didn't like the food or that they didn't eat the food or that they didn't like the service. And let's agree that, in fact, they knew that they liked the food, ate the food, and loved the service. Pointedly, let's agree that the Matossians filed a false report about the restaurant charges.
Does JPMS fire Matossian if Olive Garden complains to the brokerage firm about getting stiffed on the bill? Would FINRA still Bar Matossian for denying the validity of the restaurant charges?
There are more potential variations on the theme as you ponder the various influences, leverage, and implied threats that likely come into play when a FINRA member firm's affiliated bank is the seeming victim of a registered representative's fraud -- not the least of which is the entry of FINRA into the picture and the invocation of a Bar against future industry employment. As such, consider today's blog a thought-piece.