According to the New York Times, even though Morgan Stanley (MS) executives have known for years about the domestic violence allegations against Douglas E. Greenberg, who was one of their leading brokers, the firm continued to allow him to stay employed in its wealth management division. However, after the NY Times tried to contact the firm about him, Greenberg was finally suspended, pending review. Now, the media is reporting that Greenberg has been fired. Still, a number of the former-Morgan Stanley broker’s exes have retained their own lawyers in light of the fact that he wasn’t let go until now.
Four women have come forward accusing him of domestic abuse. Court filings indicate that not only did Greenberg’s accusers go to the police seeking protection against the now former Morgan Stanley financial adviser, but also, according to one of the women’s attorneys, the firm was issued a federal subpoena notifying it about at least one of the allegations. Morgan Stanley was also aware that Greenberg was charged for allegedly violating a restraining order.
Still, no action was taken against Greenberg, who belonged Morgan Stanley’s exclusive Chairman’s Club as one of the firm’s highest earning brokers. Ironically, the members of this club are expected to maintain certain standards when it comes to “conduct and compliance.” Greenberg is considered one of the leading wealth managers in Oregon. Firmwide, he was among Morgan Stanley’s top 2% of brokers when it came to bringing in revenue.
It is important for investors to be able to trust that their broker is someone who acts in integrity on their behalf. Firms can be held liable for inadequate supervision. As the NYT notes, it is up to regulators and companies in the financial industry to “police” the behavior of their employees. The newspaper reports that according to Finra’s site, Greenberg was previously charged with theft, but that case was dismissed. A charge of criminal mischief of the first degree was also dismissed. He has been involved in two client disputes and has had to pay a regulatory penalty. In a 2000 arbitration proceeding, Greenberg admitted to defamation but the statute of limitations had already passed.
When inadequate supervision of a broker results in investor losses, there may be grounds for a securities fraud case against the broker and/or the firm. Broker-dealers are responsible for making sure that their brokers are representatives that will act responsibly on their clients’ behalf.
Morgan Stanley Knew of a Star’s Alleged Abuse. He Still Works There, NY Times, March 28, 2018
Morgan Stanley Fires Broker Accused of Abuse, Barron’s, April 4, 2018
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Ex-Wells Fargo Broker Barred for Alleged $180K Elder Financial Fraud, Stockbroker Fraud Blog, February 26, 2018
SEC Accuses Broker of Giving Some Customers Preferential IPO Access in Exchange for Over $1M in Kickbacks, Stockbroker Fraud Blog, January 2, 2018