Morgan Stanley to Pay Almost $455K For Alleged Retirement Fund Mismanagement

A Financial Industry Regulatory Authority (FINRA) arbitration panel is ordering Morgan Stanley (MS) to pay a claimant $454,813 for retirement fund mismanagement. The claimant is The Carpenter Law Firm Defined Benefit Plan. The Carpenter Law Firm is based in Iowa.

According to the FINRA award, the law firm contends that Morgan Stanley did not put together an investment strategy that was appropriate for its defined benefit plan. This allegedly led to “excessive cash and a concentration” in just one area of the S & P.

InvestmentNews reports that the mismanagement that the Carpenter Law Firm is claiming occurred was first noticed in 2017 when one of the firm’s attorneys became concerned that his retirement portfolio may not have been properly allocated over the past ten years. The lawyer handed his portfolio over to Morgan Stanley broker, Michael Lee Canney, in 2007. Among the concerns was that market-timing had caused the broker to be “out of the market in cash” during both the account’s beginning and end. Also, over half of the portfolio was made up of closed-end funds that were purchased from Morgan Stanley.

The Carpenter Law Firm Defined Benefit Plan alleged the following:

  • Negligence
  • Breach of fiduciary duty
  • Breach of contract
  • Negligent misrepresentation
  • ERISA violations
  • Failure to supervise
  • Constructive fraud

The claimant considers inadequate supervision by Morgan Stanley to be a major reason for why Canney was able to allegedly mismanage the retirement plan. The broker-dealer, meantime, denies the allegations.

The FINRA arbitration panel awarded the retirement plan $454,813 in its case against Morgan Stanley and Canney, holding the latter two jointly liable. Of the award, $415,888 is for compensatory damages. The remainder is for related legal fees and costs.

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