FINRA Slaps J.P. Morgan Securities for Lapse in Disclosing Reps' Misconduct
J.P. Morgan's failures prevented FINRA from pursuing enforcement actions.
The Financial Industry Regulatory Authority said Monday that it has censured and fined J.P. Morgan Securities $1.1 million for failing to timely disclose 89 internal reviews or allegations of misconduct by its registered reps, which prevented FINRA from pursuing potential enforcement actions.
From January 2012 to April 2018, JPMS failed to disclose reps’ or associated persons’ misappropriation of customer and company funds, borrowing from customers, forgery or falsification or alteration of documents, unauthorized trading, making unsuitable recommendations, structuring and other suspicious activity, FINRA states.
Broker-dealers are required to file with FINRA a Uniform Termination Notice for Securities Industry Registration (Form U5) within 30 days of terminating a registered rep’s association and to file an amendment with FINRA within 30 days of learning that anything previously disclosed on the Form U5 is inaccurate or incomplete.
“When JPMS eventually filed the required information with FINRA, it was, on average, more than two years late,” which prevented or delayed FINRA, other regulators, member firms and the public from learning about the allegations, the broker-dealer self-regulator states.
These failures resulted primarily from the firm’s failure to establish and maintain reasonably designed written supervisory procedures and supervisory systems to identify all instances when Form U5 disclosures were necessary.
JPMS’ delays prevented FINRA from pursuing potential disciplinary action against 30 former JPMS reps over whom FINRA’s jurisdiction expired before JPMS disclosed the allegations.
“FINRA member firms have a responsibility to their fellow member firms, to FINRA and other regulators, and to the investing public to disclose allegations of serious misconduct by their registered representatives,” said Susan Schroeder, head of FINRA enforcement, in a statement. “Firms must live up to their responsibility as a gatekeeper and disclose allegations in a timely, accurate and complete manner. This disclosure responsibility is essential to providing transparency and maintaining the integrity of our industry.”
In settling the matter, JPMS neither admitted nor denied the charges but consented to the entry of FINRA’s findings.