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January 1, 2012

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Marsha

After speaking with a Bear Stearns/JP Morgan compliance officer regarding the significant losses to our accounts and his responses, I felt I needed to recap to make sure I understood his firm's position.

Trying to understand the responsibilities of a Bear Stearns/JP Morgan "Financial Advisor/Broker" to their clients, I emailed the compliance officer the following questions and received an interesting answer. The conclusion based upon his reply: despite paying high fees for "advisory services," it is the client's responsibility to make sure the portfolio is balanced and well invested. Since, according to BS/JPM, clients are responsible for all decisions, they would be better off doing their own research and using a discount broker.

MY EMAIL:

Let me see if I understand the relationship between an advisor/licensed agent/broker at Bear Stearns / JP Morgan.

The customer comes to the investment firm because he needs professional guidance.

A profile is done to determine the client's objectives.

The broker makes recommendations and buys mutual funds and stocks "based upon the objectives."

But these recommendations are entirely the responsibility of the client to make sure that they fit within his objectives. The firm bears no responsibility for the balancing or information or recommendations.

AM I CORRECT SO FAR?

The client has always wanted a balanced portfolio.
Even the broker refers to a balanced portfolio in his rationale and emails.

The client suggests that there are too many funds to keep track of within the Horizon fund program and would like them culled. Many have a high cost and poor record. He asks why they were chosen for his Horizon account.

Every time the client asks to do this, he is told by the broker that all those funds are needed to keep the portfolio balanced.

Later he finds out that the portfolio was not balanced.

At what point can the client rely on the advice of a broker from Bear Stearns / JP Morgan?


THE COMPLIANCE OFFICER'S ANSWER VIA EMAIL:
Rather than trying to understand the relationship between advisors/broker through different offered programs with Bear Stearns/JP Morgan, I think it would be best to reread your signed client agreement to remind yourself of your responsibility in the Horizon program.

At this point we consider the matter closed.

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