FINRA recently announced that Bear Stearns & Co., Inc. (n/k/a J.P. Morgan Securities, Inc.) has been fined $500,000 and censured for failure to supervise. Without admitting or denying the findings, Bear Stearns consented to the entry of findings that it failed to establish and maintain adequate supervisory systems within its retail brokerage operation to supervise registered representatives’ sales of a hedge fund of funds to retail customers (investors). The findings further stated that Bear Stearns failed to adequately supervise, approve and record private securities transactions a registered investment advisor engaged in on the firm’s behalf on its books and records. Finally, the findings stated that Bear Stearns’ financial advisors used marketing materials that contained hypothetical returns, failed to make adequate disclosure of the risks involved and failed to provide a sound basis for investing in a hedge fund of funds, and made exaggerated or unwarranted claims in its marketing materials.
J.P. Morgan Securities, Inc. is a FINRA registered broker-dealer based in New York City . J.P. Morgan Securities acquired Bear Stearns in May 2008.
Bear Stearns/J.P. Morgan Securities’ failure to supervise its financial advisors with respect to the sale of hedge fund investments to retail customers is particularly troubling. Hedge funds are only appropriate for high net worth, sophisticated investors. As such, Bear Stearns failure to disclose the risks of these investments to its customers was a compete derogation of its duties to its customers. Also, hedge funds are not regulated in the ways that mutual funds or other investments are. Accordingly, the risk of fraud, unsuitability, etc., is greater with a hedge fund investment than it is with other, more suitable investments, like mutual funds, or bonds.
If you have questions about investments you made with Bearn Stearns or in a hedge fund, or if you believe that you have been the victim of a securities fraud, The White Law Group may be able to help. To speak to a securities attorney, please call our Chicago office at 312-238-9650 for a free consultation.
The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Boca Raton, Florida.
For more information on The White Law Group, visit http://www.whitesecuritieslaw.com.