What Did Your Brokerage Firm or Investment Adviser Do Wrong With GWG
Published On: August 26, 2022

Stoltmann Law Offices represents investors that were sold high-risk structured products. FINRA, the federal securities industry regulator, fined J.P. Morgan $200,000 for “failing to reasonably supervise a broker who made unsuitable, unauthorized trades in his grandmother’s account with the firm,” according to thinkadvisor.com.

From March 2014 through March 2019, Evan Schottenstein, along with his brother, Avi Schottenstein, another broker at Morgan, “allegedly made the trades in question, which were largely in structured products, according to FINRA. During that period, Evan Schottenstein was responsible for his grandmother’s investment strategy and made all trade recommendations for her account, FINRA said. At the time, the grandmother was 88 years old, retired and widowed.

“Evan Schottenstein filled his grandmother’s account with structured products, exceeding his firm’s limits for such investments,” FINRA stated. “The firm used an ‘exception report’ that generated monthly alerts when structured products exceeded a 50% threshold for a client’s net account equity and a 15% threshold for a client’s liquid net worth,” FINRA noted.

Structured products are investments that employ risky derivative instruments. They are often packaged in complex products called “principal protected notes” that can lose money. They were marketed to older investors as a way to protect against market risk and low yields. In many cases, though, they tanked during periods of market volatility. They often imposed high fees and paid generous commissions to brokers.

The U.S. Securities & Exchange Commission issued an investor alert on structured notes in 2015. “Determining the performance of each note can be complex and this calculation can vary significantly from note to note depending on the structure.  Notes can be structured in a wide variety of ways,” the SEC warned. “Depending on the nature of the linked asset or index, the market risk of the structured note may include changes in equity or commodity prices, changes in interest rates or foreign exchange rates, or market volatility.”

From May 2014 through May 2015, “Evan Schottenstein bought over $108 million in securities for his grandmother, including $77 million in structured notes. On May 21, 2015, Morgan placed restrictions on how many structured products could be traded in her account. But those restrictions were ignored and, by 2019, structured notes in her account realized losses of $5.5 million,” FINRA said.

“Evan Schottenstein also created an email account in his grandmother’s name in 2014 despite the fact that she didn’t use email or own a computer and he forged her signature on a $5 million private equity investment in 2018,” FINRA alleged “JP Morgan failed to take reasonable actions to investigate and address Evan Schottenstein’s misconduct, despite the presence of red flags,” FINRA stated in a letter of acceptance, waiver and consent.

If you invested with a broker-advisor and lost money as a result, you may have a claim to pursue through FINRA Arbitration. Please contact Stoltmann Law Offices, P.C. at 312-332-4200 for a free, no obligation consultation with a securities attorney. Stoltmann Law Offices is a contingency fee law firm which means we do not get paid until you do!


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