FINRA recently issued a Letter of Acceptance, Waiver and Consent against Morgan Stanley Smith Barney LLC which provides an instructive case study on how FINRA securities firms should and should not carry out their supervisory duties over their financial advisors and customer accounts.
As discussed in the AWC here, from 2012 to 2017 one of Morgan Stanley's representatives carried out hundreds of short term trades in corporate bonds and preferred securities in the accounts of ten customers. The AWC states that due to these investments’ upfront sales charges, they were typically only suitable for customers if held long term.
Due to their position as trusted advisors to customers regarding investments and savings, and control over those investments/funds, financial advisors are uniquely positioned to commit fraud and crimes resulting in losses of the life savings of their customers. This unfortunately can include outright theft and conversion, investments in ponzi schemes, and other “unauthorized” wrongful acts.
In binding arbitration, the parties present evidence to an arbitrator or a panel of arbitrators and agree to abide by the decision of the arbitrator(s) regarding the dispute. Ideally, settling disputes by arbitration is faster and less complicated and time-consuming than going to court.
The SEC filed an Emergency Complaint on June 24, 2010 against the Estate of Kenneth Wayne McLeod, F&S Asset Management Group, and Federal Employee Benefits Group, alleging that Mr. McLeod engaged in a ponzi scheme.
Greco & Greco’s attorneys have represented a significant number of investors over the past several years who have suffered large amounts of losses in their securities accounts due to the improper and unsuitable trading of ETFs by their brokers.
The SEC has filed civil fraud claims in Illinois against The Nutmeg Group, LLC and others. Greco & Greco is currently representing investors seeking recovery of their related losses in FINRA arbitration.
The SEC recently approved final rules to govern its whistleblower program established pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act. The program has been established to encourage individuals to alert the SEC to evidence that helps the SEC in bringing securities fraud cases. The Rules were designed under the Act to increase the SEC's authority to compensate whistleblowers regarding violations of the federal securities laws. The Rules may be found here.
FINRA Brokercheck(Public CRD Disclosure Program)