National investment fraud lawyers KlaymanToskes is investigating Morgan Stanley Wealth Management after regulators ordered the firm to pay nearly $700,000 for failing to supervise its representatives selling unsuitable and high-risk investments.
Morgan Stanley entered into a letter of Acceptance, Waiver, and Consent (“AWC”) with FINRA’s Department of Enforcement which states that the firm consented to sanctions of a censure and is ordered to pay $697,897, including a fine of $200,000 and $497,897 in restitution to its customers who incurred losses.
According to the AWC’s findings, from January 2014 to December 2018, nine Morgan Stanley account representatives allegedly made hundreds of unsuitable and high-risk investment recommendations in 62 investor accounts with moderate to conservative risk tolerances.
In one example, a Morgan Stanley representative recommended that eight of his customers collectively purchase 112,100 shares in a Chinese telecommunications company. These recommendations were found to be inconsistent with the customers’ investment profiles and the value of the shares fell 70 percent by July 2016, and 93 percent by June 2018. As a result, the investors collectively suffered losses of over $1.6 million.
Other investment recommendations found to be inconsistent with customers’ conservative risk tolerances included master limited partnerships in the energy and natural resources sector, early-stage pharmaceutical, biotechnology, and telecommunications companies.
This conduct was in violation of the firm’s “Plan of Solicitation” policy. The policy requires representatives to explain their rationale when seeking to recommend more than 60,000 shares of securities not included in the S&P 500 Index, not covered by Morgan Stanley Research, and/or not rated 3 stars or better by an independent third-party research service. The policy also requires a supervisor to review and approve each plan prior to a representative recommending the security.
The representative who sold unsuitable and high-risk investments in the Chinese telecommunications company failed to complete the plan of solicitation form and continued to recommend that his customers purchase additional shares in the security without the firm’s supervision or approval. This individual has since been barred from the securities industry for failing to comply with and testify in FINRA’s investigation.
KlaymanToskes can help you determine if your investment loss is due to unsuitable investment advice. Contact Lawrence L. Klayman, Esq. for a free, confidential consultation at 888-997-9956 or through our website, www.klaymantoskes.com.
KlaymanToskes is a leading national securities law firm which practices exclusively in the field of securities arbitration on behalf of retail and institutional investors throughout the world in large and complex securities matters. The firm has recovered over $250 million in FINRA arbitrations and over $350 million in other securities litigation matters. KlaymanToskes has office locations in California, Florida, New York, and Puerto Rico.