The Financial Industry Regulatory Authority (FINRA) sanctioned broker-dealer J.P. Turner & Company, L.L.C. (JP Turner) concerning allegations JP Turner failed to establish and enforce reasonable supervisory procedures to monitor the outside brokerage accounts of its registered representatives. In addition, FINRA alleged that JP Turner failed to establish an escrow account on one contingency offering and broke the escrow without raising the required minimum in bona fide investments.
This isn’t the first time that FINRA has come down on JP Turner’s practices and that our firm has written about the conduct of JP Turner brokers. Those articles can be accessed here (JP Turner Sanctioned By FINRA Over Non-Traditional ETF Sales and Mutual Fund Switches), here (JP Turner Supervisor Sanctioned Over Failure to Supervise Mutual Fund Switches), here (Former JP Turner Broker Neil Winterrowd Has Been Accused of Misappropriating $1.5 Million in Customer Funds), and here (SEC Finds that Former JP Turner Broker Ralph Calabro Churned A Client’s Account).
JP Turner has been FINRA firm since 1997. JP Turner engages in a wide range of securities transactions including the sale of municipal and corporate debt securities, equities, mutual funds, options, oil and gas interests, private placements, variable annuities, and other direct participation programs. JP Turner employs approximately 422 financial advisors and operates out of 185 branch offices with principal offices in Atlanta, Georgia.
FINRA found that from April 30, 2010, through August 1, 2011, JP Turner failed to establish and enforce written supervisory procedures reasonably designed to achieve compliance with the securities laws prohibiting insider trading. The FINRA rules require registered representatives to have duplicate copies of account statements for personal brokerage accounts sent to their employer member firms. In this case, FINRA found that JP Turner’s written supervisory procedures required the firm to maintain a restricted list of securities. In order to monitor employee trading for trades in restricted-list securities JP Turner required an employee to notify the other broker-dealer of their employment with JP Turner and request that duplicate statements be sent to the firm. JP Turner was then supposed to monitor daily the trading activity reflected on statements from outside accounts to determine whether trading had occurred in restricted stocks.
FINRA determined that from April 30, 2010, through August 1, 2011, two registered representatives disclosed outside brokerage accounts and JP Turner failed to monitor the transactions in the accounts. FINRA found that the firm failed to receive any confirmation or account statements related to the outside brokerage accounts and the firm had no procedures in place to track the receiving of statements and was unaware of the missing statements.
FINRA also alleged that Pacific Pavilion Investors, LLC Pacific (“Pavilion Offering”) was a $3.9 million contingency offering where JP Turner served as the placement agent. The offering memorandum stated that if $3.9 million was not raised then the offering would not close and the funds would be returned to investors. Despite these representations in the offering documents, FINRA found that no escrow account was established and that instead investor funds were wired directly from their accounts to the title company. FINRA found that investors had wired only $1,825 million to the title company. FINRA determined that even though the Pavilion Offering had not raised the $3.9 million in investments required to close, JP Turner closed the offering and caused the title company to release the deposited funds to the issuer.
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