J.P. Morgan Securities LLC (JPMS) has been fined $350,000 by the Financial Industry Regulatory Authority (FINRA) and ordered to pay over $1.8 million in restitution and disgorgement for supervisory failures tied to short-term trading of syndicate preferred stocks.
JPMorgan Fined by FINRA, Ordered to Pay Over $2 Million
FINRA found that between January 2017 and December 2018, JPMS failed to maintain a supervisory system capable of identifying whether its representatives were recommending unsuitable short-term trades in syndicate preferred stocks to retail customers.
The regulator said that at least 15 JPMS representatives were found to have advised customers to buy and then sell these income-focused securities within 180 days, often at a loss, while still collecting concessions and, in some instances, commissions.
As a result, JPMS violated FINRA Rules 3110 and 2010, which require firms to maintain proper supervision and uphold just and equitable principles of trade.
The firm has agreed to pay $157,505 in restitution to affected clients and disgorge $1,672,923.
FINRA noted that JPMS’s surveillance system lacked alerts tailored to detect short-term trades in syndicate preferred stocks, and that the firm generally failed to investigate such trading patterns even when flagged at the account level.
While JPMS has since implemented improved supervisory procedures, FINRA said the firm’s earlier controls were not reasonably designed to detect or prevent the activity in question.
The settlement was made without JPMS admitting or denying the findings.
