Jackson, MSThe Financial Industry Regulatory Authority (FINRA) has ordered Morgan Stanley to pay $2.3 million to investors, after the investors alleged in a stockbroker arbitration that the financial firm did not properly oversee its brokers, allowing mismanagement of investor accounts. Investors further alleged in their stock arbitration that the brokers engaged in misconduct in handling investments.
The Wall Street Journal (7/28/15) notes that FINRA awarded the investors $1.5 million in damages, and also awarded interest, punitive damages and more than $650,000 in costs. The investors reportedly asked for more than $4.4 million in their arbitration, during which they claimed their broker conducted unauthorized trades for around four years. Among the alleged trades, according to InvestmentNews (7/28/15), were stocks that one of the brokers owned.
One of the brokers, Steven Mark Wyatt, has reportedly been involved in four cases, two of which have been resolved with no admission of liability. Wyatt no longer works for Morgan Stanley, although two other named Morgan Stanley employees are still employed with the company.
A lawyer for the investors said there were failures at every level in Morgan Stanley, which allowed the misconduct to occur. Morgan Stanley has said it disagrees with FINRA’s decision and that it takes its responsibilities to its customers seriously.
Meanwhile, a couple who filed an arbitration against UBS Financial Services Inc. were reportedly awarded $2.5 million by the FINRA panel. The couple alleged UBS was guilty of misconduct in selling Puerto Rican government bond funds and using a credit line to purchase further UBS bond funds. According to Daily Business Review (8/12/15), the couple, Orlando Rodriguez Gonzalez and Milagros Vila Maldonado, were awarded $2.545 million.
FINRA has also hit a family from a reality TV show with fines. StockCross Financial Services, owned by David Gebbia - who is married to Carlton Gebbia from Real Housewives of Beverly Hills - and his brothers, has been ordered to pay $800,000 in fines for violating rules regarding short selling. Wealth Management (8/12/15) reports a FINRA investigation uncovered flaws in StockCross’s monitoring systems, allowing violations of short-selling laws.
Investors who have complaints of misconduct, negligence or other ethical violations against their broker or brokerage firm are often required to file FINRA arbitration rather than lawsuits to resolve their complaints. FINRA is the organization that oversees the securities industry. According to the organization’s website, in 2014 it brought 1,397 disciplinary actions against brokers and firms, and ordered $32.3 million be paid to investors harmed by brokers or brokerages.
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