Bloomberg News

Chase Must Reimburse Customers $1.9 Million on Finra Order

November 18, 2011

(Updates with details on Finra order starting in second paragraph.)

Nov. 15 (Bloomberg) -- The Financial Industry Regulatory Authority ordered JPMorgan Chase & Co. to reimburse customers more than $1.9 million for losses incurred from recommending unsuitable investments and fined the firm $1.7 million.

Brokers with Chase Investment Services Corp. made almost 260 unsuitable recommendations to customers to purchase unit investment trusts with significant holdings in high-yield bonds, resulting in losses of about $1.4 million. The firm’s brokers also recommended the purchase of floating-rate loan funds, which may be illiquid or subject to significant credit risk, to conservative customers, resulting in losses of almost $500,000, according to a statement today by Finra, the Washington-based self regulator for the securities industry.

“Chase allowed its brokers to sell risky UITs and floating-rate loan funds without providing them with the training, guidance and supervision necessary to determine whether these products were suitable for their customers, which resulted in losses for Chase’s customers,” said Brad Bennett, Finra executive vice president and chief of enforcement, according to the release.

JPMorgan neither admitted to nor denied the charges, according to the release.

Michelle Ong, a Finra spokeswoman, declined to comment beyond the release. Tom Kelly, a JPMorgan spokesman, declined to comment on the order.

--With assistance from Will Daley in New York. Editors: Rick Levinson, Steven Crabill.

To contact the reporter on this story: Elizabeth Ody in New York eody@bloomberg.net

To contact the editor responsible for this story: Rick Levinson at rlevinson2@bloomberg.net.


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