The Financial Industry Regulatory Authority Inc. on Thursday censured and fined J.P. Morgan Securities $200,000 for failing to reasonably supervise an ex-rep who made a series of unsuitable trades in the account of his wealthy grandmother, who was 88 and widowed when she opened her account.
The Finra action against J.P. Morgan Securities was the latest legal salvo in the case of the grandmother, Beverly Schottenstein, who last year won nearly $19 million in damages plus attorneys’ fees and costs in a Finra arbitration in which she alleged J.P. Morgan and two grandsons of mishandling her account.
Evan Schottenstein and Avi E. Schottenstein were the brokers in charge of the account but were not named in this settlement between Finra and J.P. Morgan Securities. A J.P. Morgan spokesperson on Friday confirmed the fine involved the Schottenstein matter.
The unnamed rep, or Evan Schottenstein, who has since been barred from the industry, was in charge of the account starting in 2014, when his grandmother moved $15 million in structured notes to J.P. Morgan Securities from her prior brokerage firm, according to the Finra order. J.P. Morgan's supervision of the adviser was inadequate for the next five years, according to Finra.
The rep — Evan Schottenstein — who was discharged, meaning fired, by J.P. Morgan Securities in 2019, invested the account heavily in structured products and exceeded firm limits, according to Finra. He also opened a phony email account in his grandmother's name and forged her signature on a $5 million private equity investment, according to Finra.
A spokesperson for J.P. Morgan Securities declined to comment further. Beverly Schottenstein eventually sued J.P. Morgan Securities in an arbitration overseen by Finra, and the panelists awarded her $18.6 million, with her grandson and the firm each ordered to pay $9 million in damages.
Structured notes are securities that are derived from or based on a variety of investments, from a single security, a basket of securities, to an index of other securities, and are linked to derivatives. Structured products may feature a guarantee of principal but carry risk and can lack liquidity.
Recruited assets, organic growth both powered ahead
Goldman Sachs' Padi Raphael, Global Co-Head of Third-Party Wealth, said the "door is always open" regarding a potential RIA referral program, as the firm looks to serve the "mega trend" of growing wealth from independent advisors.
UBS research finds lack of planning and communication as key challenges for high-net-worth widows and next-generation women in navigating inheritances.
The proposed "all markets" fund is structured to enable quarterly redemptions, driven by investments in public equities, fixed income, and private market assets.
The firm has been dogged by compliance issues for years, resulting in multiple fines by various regulatory bodies.
From direct lending to asset-based finance to commercial real estate debt.
RIAs face rising regulatory pressure in 2025. Forward-looking firms are responding with embedded technology, not more paperwork.
