Ex-J.P. Morgan broker: Firm pushed house funds

Claims reps didn't get commission on trades of outside funds

Jun 11, 2013 @ 2:07 pm

By Dan Jamieson

arbitration, j.p. morgan, broker, funds, proprietary
+ Zoom
((Photo: Bloomberg News))

A former J.P. Morgan broker has filed an arbitration claim alleging that the bank's securities unit encouraged sales of proprietary funds by withholding commissions from brokers on trades of outside funds.

The claim, filed last month with the Financial Industry Regulatory Authority Inc. by Bryant Tchan against J.P. Morgan Securities LLC, said that an internal review system flagged trades in nonpropietary funds and required brokers to respond to inquiries from the system within 30 days or risk losing compensation.

Mr. Tchan, who worked in a J.P. Morgan branch in Irvine, Calif., claimed the system withheld pay even though the trades in outside mutual fund trades were executed and clients charged sales fees.

J.P. Morgan has been in the spotlight since last July, when The New York Times reported that the firm pushed its brokers to sell internal products, even when outside funds may have been better options.

“Our [client] tells the same story,” said Mr. Tchan's attorney, Philip Aidikoff of the Aidikoff Uhl & Bakhtiari law firm.

Mr. Tchan wanted to diversify stock-heavy clients he inherited and use “other vendors, like [Pacific Investment Management Co. LLC] … but [J.P. Morgan] verbally discouraged him,” Mr. Aidikoff said.

“They have a supervisory system, which seems to flag the nonproprietary products and requires reps to jump through all sorts of hoops that they wouldn't [by selling] a J.P. Morgan product,” Mr. Aidikoff said.

Mr. Tchan also claimed that the bank brokerage used financial planning software to direct clients into proprietary products.

Mr. Tchan claims that a few weeks after he complained about the supervisory system last fall, his direct supervisor and a compliance official confronted him about switches he made from proprietary stock mutual funds into nonproprietary bond funds.

In his claim, Mr. Tchan said that the trades were done to make his clients' portfolios more consistent with their objectives, but that his supervisors did not believe him and “implied he would be terminated.”

Mr. Tchan “had no other option but to leave the hostile work environment … and resign,” according to his claim .

He left J.P. Morgan in November 2012, and now works for U.S. Bancorp Investments Inc., according to Finra registration records.

J.P. Morgan spokeswoman Lauren Francis declined to comment, citing the pending arbitration.

0
Comments

What do you think?

View comments

Recommended for you

Latest news & opinion

Morgan Stanley says recruiting and attrition have slowed down

If wirehouses can successfully reduce their reliance on signing bonuses to recruit brokers, they could increase profits.

Managed accounts look attractive to 401(k) advisers, but how do you measure performance?

The customization that makes them a good investment option presents a benchmarking challenge.

National Holdings' acquisition of broker-dealer WFG Investments and its 200 advisers called off

Under an alternative plan, WFG's advisers will be relocated to three broker-dealers, including one owned by National Holdings.

House committees ready two assaults on DOL fiduciary rule this week

One is a vote on a bill to kill Labor's rule and replace it with a disclosure-based best-interest standard, while the second is legislation to prevent funding for enforcement of the regulation.

Can Buckley run the house that Bogle built?

Maintaining a lead in a low-margin business brings unprecedented challenges for Vanguard's new CEO.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print