FINRA arbitrators ordered JP Morgan Securities to pay clients $485,000 in compensatory damages for a broker's excessively aggressive investment strategy in the Los Angeles area. The claimants alleged that JP Morgan broker Robert Owen Klein of Newport Beach, California was negligent in an overconcentration investment strategy, which included short selling of treasury bonds and investments in electronically traded funds (ETFs).
FINRA Arbitration Award #12-00169
Klein allegedly invested nearly 40% of the claimant customers' assets in the aforementioned U.S. Treasury bonds, which ultimately failed to the tune of costing the clients 50% of their portfolio's value—or over $1 million in losses.
The allegation pertaining to improper short sales stems from liability and risk that comes with margin calls, which provided another source for lost funds and helps explain why the clients lost a greater percentage of their portfolio (50%) than was overconcentrated (40%).
This is not the first arbitration award against JP Morgan and broker Klein. In June 2014, a separate trust filed and received relief in the amount of $1.28 million after accusing Klein of fraud, negligence, misrepresentation, breach of contract and fiduciary duty, unsuitability, misleading communications and failure to supervise (Case #12-02789).
In November, we wrote about Klein in a blog entry featuring brokers with histories of misconduct. The Wall Street Journal had identified Orange County as one of four California hotspots for misconduct—the others were Los Angeles' San Fernando Valley, Northern San Diego, and Sacramento—and Klein stood out as one of the leading O.C. 'red flag' brokers.
Klein's BrockerCheck Report includes over 10 disclosure events such as customer disputes. Five of these, including the present $485,000 action, are final, while at least six more are still pending, alleging misconduct ranging from overconcentration, unsuitable investments and recommendations to outright fraud and negligence.
If you have invested with Robert Owen Klein, JP Morgan Securities, JP Morgan Chase & Co. or with any broker, financial adviser or firm whose unsuitable recommendations, poor investment strategy such as overconcentration, negligence, or fraud has proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for investigation and consultation.