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

Claim says supervisers dogged him for selling nonproprietary products

Jun 16, 2013 @ 8:31 am

By Dan Jamieson

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 nonproprietary funds and required brokers to respond to inquiries from the system within 30 days or risk losing compensation.

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 nonproprietary funds and required brokers to respond to inquiries from the system within 30 days or risk losing compensation.

SYSTEM WITHHELD PAY

Mr. Tchan, who worked in a J.P. Morgan branch in Irvine, Calif., claimed that the system withheld pay even though the trades in outside mutual fund trades were executed and clients were 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 firm used financial planning software to direct clients into proprietary products.

Mr. Tchan claimed 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.

'HOSTILE WORK ENVIRONMENT'

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 didn't believe him and “implied he would be terminated.”

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

Mr. Tchan left J.P. Morgan in November 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

Featured video

Events

How NextGen talent is impacting financial services

Nextgen talent brings a diverse perspective and unique skills to the industry. Find out why two Utah Valley University students are so excited to make a difference.

Video Spotlight

Will It Last As Long As Your Clients Do?

Sponsored by Prudential

Video Spotlight

The Catalyst

Sponsored by Pershing

Latest news & opinion

Collective investment trusts getting more attention from 401(k) advisers

The funds are catching on due largely to lower costs and more product availability, but come with some inherent drawbacks.

Vanguard rides robo-advice wave to $65B in assets

Personal Advisor Services, four times the size of its closest competitor, combines digital and human touch.

CFPs, including brokers, may have to adhere to a stricter fiduciary duty

CFP Board revises its standards and aims to beef up fiduciary requirements of certificants.

CFP Board's proposal to expand fiduciary duty draws praise, carries risks

Some question whether brokers will drop the CFP mark or if the CFP Board will strictly enforce its new standard.

Meet our new 40 Under 40s

Introducing 40 young leaders in financial advice. Learn how their passions are driving their success and fueling the future of the industry at large.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print