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FINRA Disciplinary Action Against JHS Capital Advisors, LLC

In July 2013, FINRA reported that JHS Capital Advisors, LLC submitted a Letter of Acceptance, Waiver and Consent in which the firm agreed to be censured and fined $75,000. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that, in connection with terminating its relationship with one clearing firm, it transferred accounts from the clearing firm to another clearing firm. The first clearing firm charged a fee of $50 to transfer a non-qualified account and $90 to transfer a qualified account to the second clearing firm.

The findings stated that in connection with this transfer of accounts, the firm sent letter(s) to customers, advising them that it would liquidate the securities in their accounts, send the account proceeds to them, and close their accounts, if they did not transfer their accounts to another firm within a certain period, typically 30 days. In accounts from which the firm did not receive a response to the letter(s), it liquidated the securities in the accounts, sent the account proceeds to the customers, and closed the accounts. The firm did not have the requisite oral or written authority to execute such sales in non-discretionary accounts.

In total, in connection with liquidating the accounts, JHS exercised discretion in 882 transactions in 843 non-discretionary accounts, including at least 33 qualified accounts.  It was unclear whether the customers initiated FINRA arbitrations, or any other type of securities arbitration.