The Securities and Exchange Commission (SEC) investigates broker-dealer’s actions, including cases of misrepresentation, market manipulation, theft of customers’ funds, illegal schemes and the sale of unregistered securities. If the broker-dealer violates a securities law, the SEC enforces administrative action and civil penalties. In other circumstances, an investor may file a complaint with Financial Industry Regulatory Authority (FINRA).
Recently, a complaint was filed against Robert O. Klein (Klein) and J.P. Morgan Securities LLC (J.P. Morgan). The client asserted the following claims, the broker-dealer and the securities firm breached their fiduciary duty, broker-dealer’s investment strategy used unauthorized margin transactions, and the broker-dealer selected investments that were unsuitable for their account. Although Klein denies any misconduct, J.P. Morgan has settled two claims against Klein. In both instances, clients alleged that the investment strategy was unsuitable and overly concentrated in a short Treasury bond positions. Klein responded to these allegations by stating that the losses were the result of a rapid deterioration in market conditions and he employed the appropriate investment strategy.
Although each investor portfolio differs, Klein appears to be facing allegations of employing unsuitable investment strategies in four other cases pending before FINRA. The claimants allege that Klein misrepresented the level of risk and used margins to leverage managed accounts. Past allegations faced by Klein have dealt with Zero Coupon Treasury bond (Zero Coupon Treasuries).