A fine has been levied against J.P. Morgan in a case involving a broker who made unauthorized and unsuitable trades in his grandmother’s account, according to a report by ThinkAdvisor.
The Financial Industry Regulatory Authority fined the firm $200,000 for failing to adequately supervise Evan Schottenstein as well as his brother Avi Schottenstein.
Evan’s grandmother Beverly Schottenstein, then 88, opened an investment account with J.P. Morgan in March 2014 in which Evan handled the investment strategy and made trade recommendations. She transferred about $15 million in structured notes to the new account.
FINRA said J.P. Morgan’s system generated alerts when structured products went beyond 15% of a customer’s net worth, but said that Evan Schottenstein exceeded that limit multiple times in purchasing securities for Beverly’s account. After five years, the structured notes in her account had incurred losses of $5.5 million.
In addition, Evan allegedly forged his grandmother’s signature on a $5 million private equity investment, one of at least 100 unauthorized trades officials said he made for her.
Evan was terminated by J.P. Morgan in 2019 and Avi Schottenstein stopped working for the firm the same year. Beverly Schottenstein filed an arbitration claim against her grandsons and in 2021 she was awarded about $18.6 million by a FINRA arbitration panel. The arbitrators ordered J.P. Morgan to pay $9 million, Evan $9 million, and Avi over $600,000.
In fining J.P. Morgan the additional $200,000, FINRA found that the firm had failed to take reasonable actions to investigate and address Evan’s actions, “despite the presence of red flags.” J.P. Morgan was found to be in violation of NASD Rule 3010 and FINRA Rules 3110 and 2010.
The firm did not admit or deny the findings, but did agree to the fine and a censure.
At Lewitas Hyman, we represent clients nationwide who are the victims of unauthorized trading, breaches of fiduciary duty and other forms of financial advisor misconduct and securities fraud. Our team of lawyers brings a diverse range of knowledge and experiences to our clients’ cases. Having worked for financial institutions, including Morgan Stanley and UBS Financial Services, and regulators such as the SEC, we have deep insight in all aspects of securities law. If your financial adviser made trades without your consent, you may be able to pursue a lawsuit to recoup your losses. Contact us at (844) 651-2641 or email our team to learn more.