The
Financial Industry Regulatory Authority has ordered
Chase Investment Services to reimburse customers around $1.9 million for losses made on “unsuitable” investment products, and fined the firm $1.7 million.

The customer losses were made after Chase brokers recommended unit investment trusts and floating rate loan funds to “unsophisticated” customers, “without having reasonable grounds to believe that those products were suitable,” the regulator said in a statement. Two of the UITs on the firm’s list of approved products held a “large percentage” of high-yield and junk-bonds in underlying assets, the statement said.

"With the growing number of complex products in the market today, it is incumbent upon firms to properly train and provide guidance to their brokers about the products that they sell and supervise the sales practices of their brokers,” said Brad Bennett, executive vice president and chief of enforcement at FINRA.

The agency alleges Chase did not provide its brokers with sufficient training and guidance regarding the risks and suitability of UITs and floating rate loan funds. The regulator cites 260 unsuitable recommendations of UITs to customers with little or no investment experience and conservative risk tolerances.

Chase neither admitted nor denied the charges, but consented to the entry of FINRA's findings.