Joseph Leon Bess II of Edmond Oklahoma a stockbroker formerly registered with J.P. Morgan Securities has been fined $5,000.00 and suspended from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity based upon consenting to findings that Bess mismarked customer’s order tickets concerning exchange traded fund purchases. Letter of Acceptance Waiver and Consent No. 2014041059901 (Aug. 11, 2016).
According to the AWC, Bess mismarked one hundred thirty-nine order tickets in twenty-one customers’ accounts by claiming that he had not solicited the transactions. FINRA stated that Bess actually solicited each of the exchange traded fund transactions. Moreover, the AWC stated that throughout this time, the exchange traded funds that Bess solicited were not securities approved by the firm for solicitation. Therefore, the transactions would have been reportedly denied had Bess solicited them. Apparently, Bess attempted to circumvent the firm’s restrictions on the solicitation of those securities by falsely claiming that they were solicited. FINRA found Bess’ conduct violative of FINRA Rules 2010 and 4511.
As we wrote in November:
Stockbrokers often seek to aviod detection by supervisors, by mismarking solicited orders, i.e. order recommended by the broker, as “unsoliicted,” meaning that the customer purchased the securities on their own initiative, and thefore the broker has no responsibility or liability for any recommendation. FINRA Conduct Rule IM-2310 with regard to suitability provides that:
(a) In recommending to a customer the purchase, sale or exchange of any security, a member shall have reasonable grounds for believing that the recommendation is suitable for such customer upon the basis of the facts, if any, disclosed by such customer as to his other security holdings and as to his financial situation and needs.
No recommendation, no violation of Rule 2310. However, absent special circumstances, or affinity to a particular local company or industry, when all or many of a broker’s customers, who do not know each other, are all purchasing the same security, the common nexus being only that of the broker, there is a substantial chance these transactions (usually in lower priced or speculative securitgies, are really solicited and secretly recommended by the broker. Hence, many broker-dealers have supervisory tools, including “unsolicited activity reports” to detect and prevent such conduct.
https://securitiesarbitrations.com/philip-patlis/
FINRA Public Disclosure confirms that at least one customer filed an investment related complaint concerning Bess’ activities in which the customer requested $32,152.17 in damages based upon accusations that the customer was placed in a variable annuity that was misrepresented and unsuitable for the customer.
Bess was terminated from J.P. Morgan Securities during the time that the firm internally investigated him for possibly soliciting closed end funds which were not approved through the firm to be solicited; and for soliciting variable annuity products that were not suitable for customers.
