The first client arbitration award out of a wave of complaints involving a discharged former J.P. Morgan Advisors representative will cost the firm $4 million.
A panel of three FINRA arbitrators in Houston ordered the firm’s traditional brokerage to pay Lacey Winston Keath compensatory damages in a Dec. 9
The award appears on the
“The arbitration process is not necessarily a fair process for the average investor,” said Schulz, who has testified as an expert witness in more than 600 arbitration and civil cases. “Often it's a fraction of what was claimed in losses.”
Representatives for J.P. Morgan declined to comment on the case. Efforts to reach Turley through other businesses listed in his detailed BrokerCheck file were unsuccessful. The attorneys representing Keath in the claim didn’t respond to requests for comment.
The award didn’t mention Turley, but the industry news outlet AdvisorHub first
Her May 2020 case against J.P. Morgan included claims of statutory fraud, breaches of contract and fiduciary duty, negligence and gross negligence, a violation of the Consumer Protection and Deceptive Trade Practices Act, misrepresentations and omissions, and a failure to supervise.
In the filing, Keath alleged that, “Without receiving her authorization, respondent traded unsuitable securities in her account, including high-risk equities and ‘junk bonds’ and used leverage to facilitate the trades, including foreign currency positions that increased the risk in claimant’s account,” according to the award.
J.P. Morgan denied Keath’s allegations and claimed in its own filing that she had agreed to indemnify the firm for its losses under the firm’s client contract and power of attorney agreement, the award document shows. The firm asked the arbitrators to assess the full cost of the case to Keath based on its claim.
The arbitrators denied J.P. Morgan’s counterclaim, as well as Keath’s requests for punitive and treble damages and attorneys’ fees. J.P. Morgan must pay $27,675 in hearing fees, compared to $2,175 assessed for Keath.
The website of the Sonn Law Group, where attorney Jeffrey Sonn represented Keath, offers more details about the allegations in the case. Turley recommended that one of his clients borrow $3 million worth of yen and euros to invest on margin and built a portfolio that was “outrageously aggressive and over-concentrated in highly speculative stocks and bonds,”
“The allegations state that Turley essentially treated the client’s accounts as his own, rapidly making trades without authorization from the client,” the post said, with hints that more awards and cases may be on the way. “Pursuant to FINRA rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, J.P. Morgan may be liable for investments or other losses suffered by Turley’s customers.”
