Morgan Stanley Owes $2.5M Over Trader Supervision

A Financial Industry Regulatory Authority arbitration panel has awarded $2.5 million to a group of physicians who claim their Morgan Stanley & Co. Inc. trader in Jackson, Mississippi, was able to commit unauthorized trades and falsify business returns because of a lack of supervision.

The three-arbitrator panel found July 24 that Morgan Stanley and branch manager Fred Brister were liable for compensatory and punitive damages, as well as attorneys’ fees and costs, under federal and state law after a broker allegedly traded investors’ money fraudulently before the 2008 financial crisis.

Joe C. Peiffer of Peiffer Rosca Wolf Abdullah Carr & Cane LLP said his six clients went to a big name like Morgan Stanley for investment services, expecting that someone would watch over their broker, who allegedly went rogue with their money.

“From day one until the day Steve Wyatt left [the company] there was almost no supervision,” Peiffer said. “It’s just about as bad as I’ve ever seen. I’ve represented more than 500 investors and this behavior is about as bad as it gets.”

The physicians filed their claims in June 2012, claiming their investment professional at Morgan Stanley had traded erratically without their authorization, he said.

Peiffer said his investor clients arbitrated the dispute over six months. He also claims very few FINRA awards get attorneys’ fees, awards and interest, and attributes the award to the severity of investment professional Steve Wyatt’s conduct and Morgan Stanley’s lack of oversight.

Included in the award was about $1.5 million for compensatory damages, about $104,000 for punitive damages, $609,000 for attorneys’ fees and interest on the compensatory damages.

Peiffer said his clients hope Mississippi regulators will take action against Wyatt.

Credits: Law360

Alan Rosca (1157 Posts)

Alan is a securities lawyer. He also teaches Securities Regulation at the Cleveland-Marshall College of Law. He focuses his legal practice on complex commercial and financial litigation and arbitration, particularly in the areas of securities and investment fraud. His office is in Cleveland, Ohio.


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