Articles Tagged with Morgan Stanley

Stoltmann Law Offices is a Chicago-based securities and investor rights law firm dedicated to a nationwide practice to recover money lost by investors as a result of the misconduct of financial advisors and their brokerage and investment firms. We have prosecuted at least one hundred cases over the years against Morgan Stanley and were not surprised to learn about David Todd Levine and his being barred by FINRA, the State of Colorado, and the Securities and Exchange Commission. These bars were “by consent” meaning none of the allegations made against Mr. Levine were proven. It just means instead of fighting them, Mr. Levine will instead never be able to legally provide investment advice to anyone for the rest of his life.

According to an Order Instituting Administrative Proceedings (OIP) filed by the SEC, which parroted claims made by the Colorado Securities Commissioner, Mr. Levine recommended that clients invest in a Bitcoin investment being run by his brother. In so doing, Mr. Levine allegedly failed to disclose that his brother was a fugitive from the law in the United States, living abroad. The Commission further alleged that Mr. Levine failed to disclose this criminal history to any of his clients and further failed to verify the legitimacy and ownership of the Bitcoin that was apparently part of this investment scheme. The SEC also alleged that Mr. Levine failed to develop a method for ensuring the transfer of funds and Bitcoin, which allowed his brother to steal $1.5 million. Levine also allegedly failed to disclose the high risk nature of this investment scheme.  If you are a victim of Mr. Levine’s alleged Bitcoin scam, and you were a client of his and Morgan Stanley, you could have a viable claim to pursue against Morgan Stanley.

Although it is alleged that Levine failed to disclose this investment and his involvement in it to Morgan Stanley, that does not automatically release Morgan Stanley from potential liability.  Whether Morgan Stanley can be found liable by FINRA arbitrators depends on two issues regardless of disclosure by Levine.  1) Were there sufficient red flags that Levine was soliciting his clients to invest in this Bitcoin investment so has to put Morgan Stanley on constructive notice of it? 2) Were clients reasonable to believe that Levine was acting within the course and scope of his employment with Morgan Stanley in recommending an investment in a Bitcoin related deal? Typically, advisors leave enough of a paper trail behind them that reasonable supervision and compliance should discovery this sort of outside activity. Levine was offering it to Morgan Stanley clients after all, so a few phone calls by Morgan Stanley and they would have uncovered what was happening. Moreover, investors would certainly be reasonable in assuming what Levine was doing was legitimate and was through or at least tacitly approved by Morgan Stanley.  This “apparent agency” issue could make Morgan Stanley liable for your losses. Courts agree. See McGraw v. Wachovia Securities, 856 F. Supp. 2d 1053 (N.D. Iowa 2010).

Chicago-based Stoltmann Law Offices has represented Morgan Stanley clients who’ve suffered losses as a result of fraudulent or negligent misconduct by Morgan Stanley and the firm’s financial advisors.

Here is a simple question too many investors do not know the answer to: Can brokers decide on their own when to buy or sell an investment in your account? Answer: Not unless you give them written permission to do so. If brokers ignore your instructions, you can file an arbitration claim and be awarded damages.  Joan A. Rudnick and an entity owned by her, Oak Trail Associates, filed a claim against her broker, Morgan Stanley, in October 2020. The claim charged the broker with “unauthorized trading, breach of contract and duty of loyalty, unjust enrichment and conversion,” according to Investment News.

Rudnick’s claim was filed when her broker sold Apple stock in her portfolio against her wishes. A retiree in her late 70s, Rudnick “had held the Apple stock for a long time and did not intend to sell it,” her attorney told Investment News. “She had put a no-trade restriction on the stock, but it was sold around March 2019. Morgan Stanley acknowledged the shares were sold without Rudnick’s authorization.”  Rudnick was awarded “$482,000 in compensatory damages, $83,372 in federal and state taxes, $45,000 in attorneys’ fees, $25,000 in brokerage fees, $5,000 in expert fees, $1,863 in costs and $375 for a non-refundable filing fee.” A Morgan Stanley spokesperson declined to comment to Investment News. “The arbitration award states the firm denied the allegations in the FINRA statement of claim and asked that it be dismissed in its entirety.” FINRA is the federal securities regulator that handles arbitration claims for investors.

Chicago-based investor rights attorneys at Stoltmann Law Offices, P.C. have been retained by an investor who lost substantial sums from her portfolio in 2018 and 2019 during an unprecedented bull market.  The investor’s complaint alleges that because her Chicago-based Morgan Stanley broker invested most of her retirement accounts in “bear” mutual funds, that she lost approximately $150,000 when her accounts should have actually increased by at least $100,000. The Morgan Stanley financial advisor apparently believed he had the ability to time the market and aggressively placed unsuitable bets on the market’s direction. It is alleged that Mr. George bet virtually all of this investor’s retirement money on the belief that the stock market would abruptly collapse in 2018 or 2019. Unfortunately for this investor, who is retired and has little investment experience to speak of, she missed out on the gains  she would have received had Morgan Stanley invested her funds in a well managed portfolio catered to her investment objectives and risk tolerance.

The specific funds that Morgan Stanley financial advisor Richard George is alleged to have recommended to this investor are:

  1. Leuthold Grizzly Short Fund (symbol GRZZX)

On August 5, 2019, FINRA fined Morgan Stanley registered representative Ken Kavanagh $25,000 and suspended him from practicing in the securities industry for eighteen after discovering that he concealed his outside business activity. According to FINRA’s order, beginning in 2003, Kavanagh provided personal management services to professional athletes. In October 2007, he registered his business as CEO-Sports in New Jersey, then formed another LLC in Pennsylvania, MGMT LLC. His services included coordinating travel and dinner arrangements, housing, bill payment, opening and managing bank accounts, and referrals to other professionals for tax return preparations and wills. Kavanagh had approximately 42 clients and generated at least $5 million in fees from 2012 through 2018 for providing these services.

FINRA Rule 3270 (formerly NASD Rule 3030) prohibits FINRA financial advisors from engaging in outside businesses unless they are properly disclosed to and approved by the advisor’s  brokerage firm. Mr. Kavanagh did not disclose his interest in MGMT or CEO-Sports to Morgan Stanley. He also attested in annual questionnaires required by Morgan Stanley that he was not involved with any outside business activities. He named a close relative as the sole owner or member of MGMT and CEO-Sports and also as the authorized representative on the each company’s bank accounts.  As a result of these FINRA Rule violations, FINRA fined Kavanagh $25,000 and suspended him for eighteen months.

As Stoltmann Law Offices previously alerted investors, Kavanagh has not been registered in the securities industry since resigning from Morgan Stanley in April 2018 after a client complained of his undisclosed outside business activities. On August 15, 2018, a customer also complained that Kavanagh placed unauthorized trades and forged documents.

AdobeStock_199789587-300x200According to a recent Letter of Acceptance, Waiver and Consent (AWC) with the Financial Industry Regulatory Authority (FINRA), RBC Capital Markets broker Cheryl George has violated securities laws and internal firm rules. Allegedly, George received an email from an individual purporting to be a customer of RBC requesting that she transfer funds for a wire transfer. In order to generate funds for that request, Cheryl George sold securities from the customer’s account without authorization from the customer or from the firm. She told RBC that she had received the customer’s transfer request verbally, when, in fact, she had only received the request over email. This is against securities laws. A broker must receive a verbal request from a customer in order to transfer funds. This misconduct occurred in June of 2017. She was suspended from associating with any Financial Industry Regulatory Authority (FINRA) member firm in any capacity for 20 days and was fined $5,000.
According to her online, FINRA BrokerCheck report, Cheryl A. George was previously registered with Citigroup Global Markets in Williamsville, New York from March 2001 until June 2009, Morgan Stanley in Williamsville from June 2009 until December 2009, and RBC Capital Markets in Williamsville from December 2009 until April 2018. She is not currently registered as a broker within the industry.

AdobeStock_41845221-300x212Stoltmann Law Offices is interested in speaking to those investors who may have suffered losses with Beverly Hills Wealth Management (BHWM) broker Margaret Mulligan Black (aka Margaret Mulligan Scott). Ms. Black recently entered into a cease-and-desist order with the Securities and Exchange Commission (SEC). The cease-and-desist order claims that Black withheld prepaid, unearned advisory fees totaling $131,000 from 63 departing clients who requested terminating their advisory relationship with BHWM despite representations made in its Form ADV brochures and advisory agreements. Specifically, Black and the firm refused to recognize clients’ e-mails and mailed requests as proper termination notices. They instead demanded that the clients send written requests with a “wet signature.” Between March 2013 and April 2018, BHWM and Black continually omitted material facts and made false and misleading statements regarding BHWM’s financial condition in its Firm Brochures. The firm failed to disclose that it was unable to repay its loans during this entire time. BHWM had borrowed $700,000 in order to keep the firm afloat. The firm also owes an additional $75,000 in unpaid interest. These are against securities laws.
Margaret Mulligan Black, according to publicly available records with the Financial Industry Regulatory Authority (FINRA), is not currently registered as a broker. She was previously registered with Calton & Associates, Mutual Securities, Purshe Kaplan Sterling Investments and Morgan Stanley from 1979 until 2008, all in Beverly Hills, California. Beverly Hills Wealth Management may be liable for any losses sustained, because the firm had a duty to reasonably supervise Ms. Black while she was registered there. We take cases on a contingency fee basis only.

AdobeStock_90383187-1-300x194Stoltmann Law Offices is investigating former Western International Securities broker Jorey Bernstein. A customer alleged that Mr. Bernstein participated in illegal interactions and outside business activities with a third party. This can create conflict of interest within the firm. Another customer alleged that Bernstein excessively traded his account and requested damages of $3,000,000. The dispute is currently pending. Excessively trading is also referred to as “churning,” and is when a broker trades in and out of a customer’s account, sometimes daily. This is a tactic used by brokers to generate large commissions for themselves and typically results in the customer paying unnecessary fees. It is against securities laws and internal firm rules. A brokerage firm has a duty to oversee its employees so they do not violate securities laws. If the firm does not, it may be liable for investment losses in the Financial Industry Regulatory Authority (FINRA) arbitration forum on a contingency fee basis.
According to his online, FINRA BrokerCheck report, Jorey Bernstein was previously registered with Citigroup Global Markets in Los Angeles, California from October 2005 until June 2009 and Morgan Stanley in Beverly Hills, California from June 2009 until December 2015. He is currently registered with Western International Securities in Pasadena, California and has been since December 2015. He has one customer dispute against him alleging excessive trading with respects to trades in accounts and one employment separation after allegations.

AdobeStock_41845221-300x212According to a recent Letter of Acceptance, Waiver and Consent (AWC) with the Financial Industry Regulatory Authority (FINRA), MSI Financial Services broker Kelly Barnett allegedly used discretion in the accounts of five customers without written authorization or acceptance of the accounts as discretionary. Kelly Barnett also allegedly falsified notes of client contact. Barnett allegedly authorized discretion in the account of one of her customer’s who had died of a heart attack two days before. He placed two additional trades in his account for the purchase of a UIT and the sale of an ETF. The customer had not given Barnett written authorization to do so before his death. In addition, Kelly Barnett also exercised discretion in four additional customer accounts without a written grant of authorization and without having the accounts accepted as discretionary between January 2014 and November 2015. In total, Kelly Barnett executed 25 discretionary trades in the accounts of the four customers. For this misconduct, he was fined $15,000 and suspended from the industry for six months.
Kelly Marvin Barnett was previously registered with B.B. Graham & Company, Morgan Stanley, Morgan Stanley & Co. Inc., Edward Jones in Sarasota, Florida from February 2009 until August 2012, MetLife Securities in Sarasota from August 2012 until December 2015, and FSC Securities Corp in Sarasota from January 2016 until April 2018. He has one criminal disposition against him, and an employment separation after allegations, according to his FINRA BrokerCheck report, online. He is not currently registered as a broker within the industry. If you or someone you know suffered losses with Kelly Barnett and would like to speak to an attorney about your losses, please call us today for a free consultation. Attorneys are standing by.

AdobeStock_91053286-1-300x194If you or someone you know has lost money with James O’Keefe, you may be able to recover those losses by suing his former firm, Morgan Stanley, in the Financial Industry Regulatory Authority (FINRA) arbitration forum on a contingency fee basis. Mr. O’Keefe was accused of recommending unsuitable stocks from 2001 until 2015. In 2014, he was accused of recommending unsuitable stock investments from October 2007 until September 2014. In a separate complaint, O’Keefe, while registered with Merrill Lynch, was accused of making unsuitable investments and churning accounts. Churning is an especially egregious violation of securities laws, in that it typically leads to large commissions for the broker when he trades in and out of securities, sometimes on a daily basis. It also typically leads to unnecessary fees for the client. Please call us today to speak to an attorney for free about your options of suing Morgan Stanley in the FINRA arbitration forum. The call is free with no obligation.
James W. O’Keefe was previously registered with Thomas James Associates from February 1988 until March 1988, Waddell & Reed from June 1988 until October 1988, Merrill Lynch in New York from January 1990 until August 2001, and Citigroup Global Markets in New York from August 2001 until June 2009. He is currently registered with Morgan Stanley in New York, and has been since June 2009. He has four customer disputes against him, alleging unsuitable stock purchases, churning, and other things. He has one criminal final disposition against him.

AdobeStock_35532974-1-300x200The Financial Industry Regulatory Authority (FINRA) has barred former Morgan Stanley broker Matthew Singer for failing to appear at a hearing in connection with a FINRA investigation. He was being investigated regarding whether he and others made unsuitable options recommendations to customers. Morgan Stanley filed a Form U5 termination notice listing the reason for his termination as “concerns regarding his conduct in a client arbitration matter.” These are against securities laws and internal firm rules. Singer was previously registered with Knight Equity Markets, Knight Capital Markets, Hudson Securities, C.L. King & Associates, Capstone Investments, Ascendiant Capital Markets, FBN Securities, and Morgan Stanley in Aventura, Florida from July 2013 until March 2016. He has three customer disputes against him, alleging unsuitable investments, unsuitable options trading strategies, and misrepresentation and unauthorized trading. He is not currently registered as a broker, according to his online, FINRA BrokerCheck report.

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