Another Award Against Morgan Stanley

A retired policeman was awarded $270,000 against Morgan Stanley by a Financial Industry Regulatory Authority (FINRA) arbitration panel in Phoenix AZ. (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.”

The panel awarded $91,400 for the liability of Morgan Stanley for the failure to supervise. 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.

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