Morgan Stanley Gets Hit in Phoenix

A Financial Industry Regulatory Authority (FINRA) arbitration panel entered an award in favor of a retired policeman against Morgan Stanley for $270,000 on October 18, 2010. The panel broke down the compensatory damages for liability due to overconcentration ($127,000), liability due to failure to supervise ($91,400), for attorney’s fees ($46,600) and for expert witness fees ($5,000). (FINRA #09-05255; Raymond Cole v. Morgan Stanley & Company, Inc.)

Evidence was provided during the hearing regarding charges against Morgan Stanley by the State of Washington Department of Financial Institutions Order #S-02-030-03-SC01, (Nov. 4, 2003). Paragraphs 99-105 charges Morgan Stanley with the failure to establish adequate procedures to detect suitability: “The Morgan Stanley Customer Activity Report, “CAR”, was primarily designated to detect only excessive trading and that would lead to the discovery of other potential violations of the suitability rule.”

Several recent awards have focused heavily on brokerage firm’s failure to adequately supervise their employees. Often the branch manager is reluctant to supervise their star producers because their salary is in part dependent upon the profitability of the office, among other things. Unfortunately, supervision is usually put on the back burner in favor of profitability, when it could nearly always alleviate abuse.

Contact Us
Free Consultation: (800) 259-9010