FINRA announced Tuesday that it had ordered Chase Investment Services Corp. to reimburse customers more than $1.9 million for losses stemming from unsuitable unit investment trust and floating-rate loan fund sales. Chase, who’s parent company is JPMorgan Chase, was also fined $1.7 million.
According to FINRA’s investigation, conducted by Melanie Hilley, Jonathan Golomb, Thomas Kimbrell and Wendy Velez, under the supervision of Bill Park and Joshua Doolittle, Chase brokers were found to have recommended UITs and floating-rate loan funds to customers with conservative risk tolerances and little experience who lacked a sophisticated understanding of investments. Chase was also found not to provide its brokers with sufficient training and guidance regarding the risks and suitability of UITs and floating-rate loan funds.
Chase neither admitted nor denied the charges.
UITs are investment products consisting of a diversified basket of securities that can include risky, speculative investments such as high-yield/below investment-grade or junk bonds. Floating-rate loan funds are mutual funds with a general portfolio consisting of secured senior loans made to below-investment-grade, or junk-rated, entities.