Morgan Stanley

Ex-Morgan Stanley Broker Suspended Over Alleged Churning

Published on: June 4, 2019 | by Shepherd Smith Edwards & Kantas, LLP

David Strnad, a longtime broker, has been suspended by the Financial Industry Regulatory Authority (FINRA) for 18 months. According to his BrokerCheck record, in 2016, the daughter of a client accused Strnad of churning in her father’s account while he was a registered Morgan Stanley representative. Following the allegations, FINRA opened a probe into the matter.

The self-regulatory authority (FINRA) found that Strnad made over 270 trades involving CDs in the account of one elderly customer between 2013 and 2015. While the client had given the former Morgan Stanley broker permission to purchase the CDs, Strnad allegedly exceeded the authority granted to him when he sold the CDs before they matured and used the money made from those transactions to purchase more CDs for the client.

As a result, said FINRA, the client ended up paying nearly $4300 commissions that were not warranted. Morgan Stanley has since paid that money back to the client.

Morgan Stanley Ordered to Pay $519K to Retired Couple

Published on: May 24, 2019 | by Shepherd Smith Edwards & Kantas, LLP

A Financial Industry Regulatory Authority (FINRA) arbitration panel has awarded $519,000 to Stephen and Brenda Balock in their investor fraud claim against Morgan Stanley (MS). The couple contends that that one of the firm’s brokers, Tim J. Prouty, placed their funds in investments that were complex and inappropriate for them, causing them to lose money in eight accounts between 2012 and 2015. They filed their claim against Morgan Stanley in 2016.

The Balocks began working with Prouty after Stephen’s employer, the Public Service Co. of New Mexico, compelled him into early retirement due to downsizing. He had never worked with a broker before then.

The couple wanted to invest in certificates of deposit. Instead, Prouty placed them in a Morgan Stanley investment advisory program that involved more complex investments, such as options contracts, derivates, junk bonds, and exchange-traded funds. In their investor claim against Morgan Stanley, the Balocks made a number of allegations, including the following:

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

Published on: May 8, 2019 | by Shepherd Smith Edwards & Kantas, LLP

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.

Morgan Stanley To Pay $150M Over Mortgage-Backed Securities

Published on: May 6, 2019 | by Shepherd Smith Edwards & Kantas, LLP

Morgan Stanley (MS) has agreed to a $150M settlement with the California State Teachers’ Retirement System (CalSTRS) and the California Public Employees’ Retirement System (CalPERS) to resolve claims that it misled investors about the risks involved in mortgage-backed securities, which both pension funds purchased from 2003 to 2007. CalSTRS and CalPERS lost millions of dollars from investing in these MBSs prior to the 2008 financial crisis.

In a news release, California Attorney General Xavier Becerra accused Morgan Stanley of placing profits over the pension funds’ public employees and teachers when the firm didn’t fully disclose the MBSs’ risks. These complex investments package together thousands of mortgage loans, and not all of the loans share the same level of quality.

Mr. Becerra’s office, which conducted a probe into Morgan Stanley’s handling of MBS sales, found that the brokerage firm did not “accurately” portray many of the underlying mortgages’ “true” traits. Meanwhile, the broker-dealer allegedly overstated the quality of certain subprime loans, including those from New Century Financial, which eventually went bankrupt. Morgan Stanley is accused of knowing about these misrepresentations but doing nothing to remedy the matter.

Puerto Rico Retiree Plan Accuses UBS and Others of Bond Price Rigging

Published on: April 29, 2019 | by Shepherd Smith Edwards & Kantas, LLP

The Puerto Rico Government Employees and Judiciary Retirement Systems Administration, a pension plan for retirees of the U.S. territory’s government, has filed a proposed securities class action in federal court against Bank of America (BAC), Goldman Sachs (GS), Citigroup (C), Barclays Capital, Inc. (BARC), BNP Paribas Securities Corp., Bank of America Securities, Credit Suisse Securities, FTN Financial Securities, Deutsche Bank Securities, JP Morgan Securities, Morgan Stanley (MS), Merrill Lynch, Pierce, Fenner & Smith, and UBS Securities. The retirement fund is accusing the defendants of rigging bond prices to keep the prices up on Freddie Mac and Fannie Mae bonds.

Freddie and Fannie, both U.S. government-sponsored entities (GSEs), offer bonds to raise money for loans. According to the Puerto Rico pension plan’s bond fraud case, the trading desks of the various banks worked together to artificially raise the prices of the GSE bonds when the market took a hit after the 2008 financial crisis and Fannie and Freddie started reducing the number of bonds issued for sale. This decrease led to a loss in profits for those underwriting and trading in Fannie Mae and Freddie Mac bonds. The plaintiff contends that instead of the banks opting to lower the difference between their purchasing and selling prices and competing for clients, they worked together to fix the bond prices so they could “maximize” their profits at the expense of customers.

The Puerto Rico retirement plan’s complaint comes weeks after another proposed class action was brought by two other pension funds also accusing banks of rigging the price of GSE bonds. The pension fund plaintiffs in that fraud case are the Trust and Sheet Metal Workers’ Local 19 Pension Fund and the Dallas Area Rapid Transit Employees’ Defined Benefit Retirement Plan. The defendants are Bank of America NA, Barclays Capital, Wells Fargo Securities, LLC, Citigroup Global Markets, Inc., BNP Paribas Securities Corp., Deutsche Bank Securities, JPMorgan Securities, HSBS Bank Plc, HSBC Securities, JP Morgan Chase Bank, TD Securities, Nomura Securities International Inc., and Merrill Lynch, Pierce, Fenner & Smith.

Finra Bars Another Ex-Morgan Stanley Representative, Fines Firm $10M for AML Detection Deficiencies, and Orders It To Pay Two Investors $4.2M For Broker Fraud

Published on: January 10, 2019 | by Shepherd Smith Edwards & Kantas, LLP

Daniel Todd Levine, a former Morgan Stanley (MS) broker, has been barred by the Financial Industry Regulatory Authority after he failed to cooperate in a probe into allegations that he may have taken part in outside business activities that he did not disclose to the broker-dealer while he worked for the firm. Levine was a Morgan Stanley broker based in Denver, Colorado between 2013 and July 2018 when he stepped down. His next employer was First Financial Equity Corp., but that brokerage firm fired him a few weeks later after he did not notify them about the FINRA investigation.

According to Levine’s BrokerCheck record, he previously worked with Prudential Securities, Merrill Lynch, and UBS (UBS). He was employed in the securities industry for over 20 years.

A number of other former Morgan Stanley brokers have recently made news headlines over allegations of broker fraud. Last month, FINRA announced that it had filed a lawsuit against Ami Forte, who is accused of making unauthorized trades in the account of now deceased Home Shopping Network co-founder Roy M. Speer. In November, former Morgan Stanley financial adviser James Polese was sentenced to five years behind bars after pleading guilty to defrauding customers of over $1M.

Investor Fraud: FINRA Awards Over $1M in Churning Case Against Legend Securities and Morgan Stanley Financial Adviser is Sentenced After Spending Over $950K of Clients’ Money

Published on: November 30, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Legend Securities Ordered to Pay Client For Churning His Funds

A Financial Industry Regulatory Authority (FINRA) panel has awarded Herbert W. Voss $1.075M in his securities fraud case against Legend Securities Inc., its ex-chief compliance officer Frank Philip Fusco, and former Legend broker Danard Warthen Brown. Legend is no longer in operation and was expelled by the self-regulatory authority (SRO) in 2012.

Voss reportedly lost $375,000 while Legend was his brokerage firm. Of the more than $1M award granted to Voss, $700K is for punitive damages. His securities fraud lawyer contends that punitive damages were warranted because of how much turnover took place in Voss’s account.

FINRA Bars Another Ex-Morgan Stanley Broker

Published on: October 31, 2018 | by Shepherd Smith Edwards & Kantas, LLP

For the third time this month, The Financial Industry Regulatory Authority has announced that it has barred yet another Morgan Stanley (MS) broker. The brokerage firm had fired financial adviser Bruce Plyer in late 2016 in the wake of allegations that he executed trades in a client’s account without authorization. Now, the self-regulatory organization is barring Plyer after he failed to appear and give testimony into FINRA’s probe into the matter.

Plyer has accepted and consented to FINRA’s findings, but he is not admitting to or denying any of them.

After being let go from Morgan Stanley, he was registered for a short time with International Assets Advisory until he left the industry early last year.

Another Ex-Morgan Stanley Broker is Barred by FINRA

Published on: October 16, 2018 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority has barred another former Morgan Stanley (MS) broker. John Halsey Buck III consented to the industry bar after he did not provide the information and documents that the self-regulatory organization asked for related to its probe into his alleged involvement in unapproved private securities sales. Buck, who has over 50 years experience in the industry, was let go by the brokerage firm earlier this year.

Morgan Stanley reportedly fired him in the wake of disclosure-related issues, including those involving private investments that did not involve the broker-dealer. According to InvestmentNews, the allegations against Buck have to do with “selling away.” This is a practice that happens when a stockbroker, financial adviser, or a registered representative solicits the sale of or sells securities that his or her brokerage firm does not offer or hold. Broker-dealers usually have a list of approved products that its brokers are allowed to sell to firm clients.

Buck had been with the industry since 1965. Previous to working with Morgan Stanley, he was a registered broker with UBS Financial Services (UBS), Wachovia Securities, Prudential Securities Incorporated, Loeb Partners, and Hornblower, Weeks, Noyes & Trask.

FINRA Bars Former Morgan Stanley and Wells Fargo Brokers

Published on: October 11, 2018 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority announced this week that it is barring three former brokers. They are ex-Morgan Stanley broker (MS) Kevin Smith and former Wells Fargo (WFC) brokers Wilfred Rodriquez Jr. and Thomas A. Davis.

According to the self-regulatory authority’s order, the bar against Smith comes after he wouldn’t appear before FINRA to testify regarding allegations involving a structured products trade in a family member’s trust that he may have executed without checking with the client first.

Morgan Stanley fired Smith in 2016 in the wake of the broker fraud allegations.