FINRA suspends former JPMorgan rep for breaking up customer orders
The United States Financial Industry Regulatory Authority (FINRA) has suspended Trevor B. Rahn, a former representative of J.P. Morgan Securities LLC (JPMS), for violating FINRA rules.
Rahn became associated with J.P. Morgan Securities LLC (JPMS) on July 30, 2010 as a General Securities Representative. In a Uniform Termination Notice for Securities Industry Registration filed on September 27, 2018, JPMS reported that it had discharged Rahn on September 17, 2018 for “unacceptable practices by the representative relating to the timing and size of orders entered and resulting transaction charges in a client account and relating to the marking of certain orders for the account as unsolicited.”
During his association with JPMS, Rahn engaged in a pattern of breaking up customer orders for execution in violation of FINRA Rules. Specifically, from January 2014 to September 2018, Rahn recommended an average pricing investment strategy to his customers in which he executed orders by breaking them into multiple small trades, each generating a separate commission.
When entering the smaller trades, Rahn often entered a separate commission on each trade that was greater than the amount that would be charged under the firm’s standard commission schedule. Rahn relied on the firm’s system to automatically assign commissions in accordance with the firm’s commission schedule without taking steps to confirm it actually did so.
Because Rahn failed to conduct the necessary reasonable diligence to understand the cost implications of his recommended strategy, he lacked a reasonable basis to recommend his “average pricing” strategy to his customers. Therefore, Rahn violated FINRA Rules 2111(a) and 2010.
Also, to implement his “average pricing” strategy, Rahn exercised time and price discretion by breaking up 1,106 customer orders into over 7,500 smaller trades.
Separately, between June 2016 and September 2017, Rahn executed 577 unauthorized trades in a customer’s account in violation of FINRA Rule 2010. He also mismarked 4,714 solicited trades in three customer accounts as “unsolicited” in violation of FINRA Rules 4511 and 2010.
The respondent has agreed to settle the matter. He consents to the imposition of the following sanctions:
- an 18-month suspension from associating with any FINRA member in all capacities and
- a $10,000 fine.