J.P. Morgan

Published on: December 24, 2013

Two JP Morgan Brokers Barred by FINRA for Theft of $300,000 from Elderly Client

Two former JP Morgan Chase Securities Inc.-registered brokers, Fernando L. Arevalo and Jimmy E. Caballero are the subjecct of regulatory charges alleging theft. Reportedly, the Financial Industry Regulatory Authority (FINRA) permanently barred both Caballero and Arevalo from the securities industry.

Two JP Morgan Brokers Barred by FINRA for Theft of $300,000 from Elderly Client

FINRA’s investigation of the two brokers found that they allegedly collaborated to steal approximately $300,000 from one of their clients, a widow who had diminished mental capacity. Reportedly, the client held accounts at both JP Morgan and a related bank affiliate. She sold two annuities between April and July 2013 and deposited the proceeds — approximately $300,000 — into a bank account that had been opened for her by Arevalo.

Subsequently, the funds were allegedly withdrawn using two cashier’s checks. On the same day, the money was allegedly deposited by Caballero into a joint account he opened at a different bank in his name and the client’s name. When the deposits were questioned by the bank and further confirmation was required, Arevalo allegedly drove the client to the bank so she could confirm the source of the funds.

Published on: October 17, 2013

$7 Million Awarded to Investor in FINRA Auction-rate Securities Dispute

by InvestorLawyers

Investors who suffered significant losses as a result of their auction-rate securities investment with Jeffries Group LLC may be able to obtain a recovery via FINRA securities arbitration. Jeffries Group is a subsidiary of Leucadia National Corp., another full-service brokerage firm. Recently, Jeffries was ordered to pay an investor $7 million regarding an auction-rate securities dispute.

In May 2012, a statement of claim was filed with the Financial Industry Regulatory Authority by Saddlebag LLC. The claim alleges that the firm wrongfully invested the client’s assets in illiquid auction-rate securities (ARS). According to securities lawyers, many financial firms sold auction-rate securities as short-term instruments with a highly-liquid nature, much like money market funds.

However, in 2008, the credit crunch resulted in a failure of the ARS market and investors with a piece of the $330 billion market were stuck holding securities that they were unable to sell. Other firms, including Morgan Keegan, have been accused of misleading investors regarding the liquidity risk of auction-rate securities.

Published on: June 20, 2013

JP Morgan Policy Allegedly Conflicted with Best Interest of Customers

by InvestorLawyers

Investment fraud lawyers are currently investigating claims on behalf of customers of JP Morgan Securities LLC. At issue is whether the customers received recommendations that were unsuitable or not in their best interest because of a JP Morgan policy that conflicted with brokers’ responsibilities to their customers.

JP Morgan Policy Allegedly Conflicted with Best Interest of Customers

According to a securities arbitration claim filed by a former JP Morgan broker, the firm allegedly “had a policy to only recommend in-house product to customers, irrespective of whether that product was the best choice for customers to meet their investment objectives.” Furthermore, the firm continued to discourage the selling of outside products by allegedly making it difficult for brokers to collect commissions and fees for those products. In addition, the claim alleges that the firm’s continuing insistence on the sales of proprietary mutual funds created a perpetual conflict between the firm’s policies and a broker’s responsibility to his or her clients.

Financial Industry Regulatory Authority rules have established that firms have an obligation to fully disclose all the risks of a given investment when making recommendations, and those recommendations must be suitable for the individual investor receiving the recommendation given their age, investment objectives and risk tolerance. The alleged practices of JP Morgan would have discouraged and/or made it difficult for brokers to act in the best interest of their clients.

Published on: August 29, 2012

Investors Beware as Gas Prepayment Bonds Downgraded by Moody

by InvestorLawyers

As a significant number of gas prepayment bonds ratings have been downgraded by Moody’s Investors Service, stock fraud lawyers are advising investors to be cautious regarding their investments in these bonds. As a result of downgrades in Goldman Sachs Group Inc., Citigroup Inc., JPMorgan Chase & Co., Credit Agricole Corporate & Investment Bank, Merrill Lynch & Co., BNP Paribas, Morgan Stanley, Royal Bank of Canada and Societe Generale, numerous bonds became subject to review and subsequent downgrades.

Investors Beware as Gas Prepayment Bonds Downgraded by Moody

Securities arbitration lawyers say this situation is similar in some ways to what happened when, after Lehman declared bankruptcy, Series 2008A of Main Street Natural Gas Inc. Gas Project Revenue Bonds were downgraded. In the case of the Lehman bonds, the bonds were not guaranteed by Lehman Brothers, though certain payment obligations of the gas supplier were guaranteed.

The following is a list of gas prepayment bonds that have been affected by downgrades:

Published on: August 6, 2012

Investors of Chase Strategic Portfolio, other JPMorgan Chase Proprietary Mutual Funds Could Recover Losse

by InvestorLawyers

Securities fraud attorneys are currently investigating claims on behalf of the customers of JPMorgan Chase, specifically investors of Chase Strategic Portfolios and JPMorgan Chase proprietary mutual funds. Reportedly, when JPMorgan acquired Washington Mutual, the firm’s advisors may have engaged in improper mutual fund switching.

Investors of Chase Strategic Portfolio, other JPMorgan Chase Proprietary Mutual Funds Could Recover Losses

Last month, the Financial Industry Regulatory Authority, the Securities and Exchange Commission and other regulators reportedly initiated inquiries into the fund sales practices of JPMorgan. A recognized fund researcher, Morningstar, reported that around 42 percent of JPMorgan’s funds did not surpass the average performance of similar funds over the past three years. Furthermore, a New York Times article published last month stated that JPMorgan financial advisors were allegedly “encouraged, at times, to favor JPMorgan’s own products even when competitors had better-performing or cheaper options.” Investment fraud lawyers’ investigations will establish whether the firm or its advisors can be held responsible for investor losses that resulted because of improper sales practices.

The Chase Strategic Portfolio is reportedly one of the main products that has been pushed by JPMorgan. The investment is made up of a combination of around 15 mutual funds. Some of these funds are developed by JPMorgan. Securities fraud attorneys say the Chase Strategic Portfolio is designed to allow ordinary investors access to holdings in stocks and bonds, with varying levels of risk, accomplished through the use of six main models. The fund was launched in 2008 and reportedly has around $20 billion in assets. Chase Strategic Portfolio carries an annual fee on assets of 1.6 percent, but also includes a fee on underlying JPMorgan funds. The aforementioned New York Times article also stated that the actual annual return of the fund after fees was 13.87 percent per year, which trailed the hypothetical 15.39 percent return included in the marketing materials.

Published on: February 24, 2012

News: Bank of America Faces More Allegations

by InvestorLawyers

Investment attorneys turn their eyes to Bank of America once again, only two months into the New Year. Bank of America Corp. has been subpoenaed by William Gavin, the Massachusetts securities regulator, over LCM VII Ltd. and Bryn Mawr CLO II Ltd., two related collateralized loan obligations. These two CLOs led to investor losses totaling $150 million. The subpoena will, hopefully, help authorities in determining if Bank of America knew it was overvaluing the assets of the portfolios. Both Bryn Mawr and LCM were sold in 2007, prior to the 2008 merger between Bank of America Securities and Merrill Lynch.

News: Bank of America Faces More Allegations In 2012

Bank of America held commercial loans from small banks amounting to around $400 million in 2006. In 2007, securities packages were put together from these loans and then sold to investors. The subpoena arrives only one day after Bank of America, JP Morgan Chase & Co., Wells Fargo & Co., Citigroup Inc. and Ally Financial Inc. settled allegations of engaging in abusive mortgage practices. These abusive practices included engaging in deceptive practices in the offering of loan modifications, a failure to offer other options before closing on borrowers with federally insured mortgages, submitting improper documents to the bankruptcy court and robo-signing foreclosure documents without proper review of the paperwork.

The settlement amounted to $25 billion and involved federal agencies plus authorities in 49 states. This settlement is designed to give $2,000 to around 750 borrowers whose homes were foreclosed upon after the home values dropped 33 percent from their 2006 worth, and to provide mortgage relief. In addition, all five banks will pay $766.5 million in penalties to the Federal Reserve. This is considered to be the biggest federal-state settlement ever. Bank of America will also pay $1 billion to settle allegations that it, together with its Countrywide Financial unit, engaged in fraudulent and wrongful conduct.

Published on: December 9, 2011

Bank of America, JPMorgan, Morgan Stanley, Others Charged With Misleading Marketing

by InvestorLawyers

The Federal Housing Finance Agency (FHFA), acting as conservator for Fannie Mae and Freddie Mac, has filed securities lawsuits against a total of 17 financial entities in both federal and state courts. States in which the lawsuits were filed are New York and Connecticut. Financial institutions affected by the lawsuits, which were filed in September 2011, include Bank of America, Credit Suisse, Citigroup, Countrywide, Goldman Sachs, JPMorgan Chase, Merrill Lynch, Morgan Stanley and Deutsche Bank. These institutions, along with 8 others, violated federal securities and common laws when selling mortgage-backed securities. This is not the first time many of these financial institutions have been charged with securities fraud, and investment attorneys are doubtful that it will be the last.

The FHFA is seeking civil penalties as well as damages. Allegedly, the financial institutions violated fiduciary duty by providing misleading loan descriptions as a part of their sales and marketing materials. The marketing materials did not reveal the true risk factors associated with the loans. According to the FHFA’s press release, “Based on our review, FHFA alleges that the loans had different and more risky characteristics than the descriptions contained in the marketing and sales materials provided to the Enterprises for those securities.”

Congress and regulators have put forth a continuing effort to deal with the practices of institutions that led to the financial crisis of 2008 and this lawsuit is part of that goal. It is similar to the one filed on July 27, 2011 against UBS Americas Inc. The Housing and Economic Recovery Act of 2008 gives the FHFA the authority to file complaints such as this one.

Published on: October 27, 2011

Citigroup to Pay $285 Million for CDO Fraud

by InvestorLawyers

Citigroup settled charges brought by the U.S. Securities and Exchange Commission, and has agreed to pay $285 million to do so. According to the SEC, Citigroup defrauded investors by betting a toxic housing-related debt would fail, but selling the CDO to investors anyway. According to an article by Reuters, “The SEC said the bank’s Citigroup Global Markets unit misled investors about a $1 billion collateralized debt obligation by failing to reveal it had a ‘significant influence’ over the selection of $500 million of underlying assets, and that it took a short position against those assets.”

Citigroup to Pay $285 Million for CDO Fraud

Citigroup is the third major bank to settle with the SEC for failing to disclose betting against a collateralized debt obligation, or CDO, and then marketing it to customers. JPMorgan settled for $153.6 million in June and Goldman Sachs settled for $550 million in July 2010.

In November 2007, the CDO defaulted and, while investors faced losses, Citigroup made $160 million. This contributed to the 2007-2009 financial crisis and is, therefore, a part of the mission to reduce broker fraud and hold Wall Street figures accountable for triggering the recession. According to the SEC, the Citigroup employee who was primarily responsible for structuring the transaction was Brian Stoker. In response to the files charged against him by the SEC, one of his lawyers said the allegations had “no basis.”

Published on: August 17, 2011

THE SEC’S “OFFICE OF THE WISTLEBLOWER” OPENS

by InvestorLawyers

The SEC’s new whistleblower office, which officially opened August 12, hopes to have a significant effect on corporate and stock broker fraud.

The SEC’S “office of the whistleblower” opens” OPENS

Under this new program, cash awards will be issued to corporate employees who report fraud to the SEC in order to expose corporate crime. Individuals who report fraud under this program could receive up to 30 percent of the amount that is collected from the guilty party. To qualify, the tipster must volunteer new information that leads to a successful collection of at least $1 million in fines.

“Through their knowledge of the circumstances and individuals involved, whistleblowers can help the commission identify possible fraud and other violations much earlier than might otherwise have been possible," SEC officials say. "That allows the commission to minimize the harm to investors, better preserve the integrity of the United States’ capital markets, and more swiftly hold accountable those responsible for unlawful conduct.”

Published on: July 18, 2011

JPMORGAN’S $211 MILLION SETTLEMENT CLOSE ON THE HEELS OF $154 MILLION SETTLEMENT

by InvestorLawyers

JPMorgan is in the financial spotlight once again — this time with its second major federal settlement within a month. Whereas last month’s settlement was in connection with broker misconduct that affected investors, the more recent developments involved state governments and government organizations. In its most recent settlement, JPMorgan Chase agreed to pay $211 million for bid-rigging of municipal bond transactions. Thirty-one state governments were affected from 1997-2005 because of at least 93 tainted transactions. The $211 million settlement will be split between the Internal Revenue Service, a group of state attorneys general and the Office of the Controller of the Currency. A settlement also was reached with New York’s Federal Reserve Bank.

JPMorgan’s $211 Million Settlement Close on the Heels of $154 Million Settlement

Secret deals allowed the bank inside information about competitors’ bids and were aided by a minimum of 11 bidding agents. JPMorgan Chase maintains that any illegal actions were concealed from management as a whole and were conducted against the firm’s policies. The illegal conduct was, according to JPMorgan, made by former employees. Furthermore, the division in which these employees used to work has been shut down and the firm has increased their ethics training for staff and implemented an improved compliance program. This settlement will undoubtedly send a message to the financial world of the repercussions of tampering with the fairness of the bond market.

In addition to the most recent settlement, last month JPMorgan settled with the SEC for $154 million, paid in response to allegations that it mislead buyers of complex mortgage investments. In connection with this settlement, James Hertz, a former JPMorgan executive, pleaded guilty to criminal charges. Hertz is one of 18 financial services executives to be brought up on criminal charges, nine of which have pleaded guilty. In this case, The New York Times says “Investors harmed in the JPMorgan transaction, known as Squared CDO 2007-I, will receive all their money back,” a happy ending in financially-turbulent times for many investors.