A Financial Industry Regulatory Authority panel arbitration panel says that Morgan Stanley (MS) must pay at least $2.4M to settle the latest client claims accusing its former broker, Steven Mark Wyatt, of mishandling their investments. The brokerage firm fired Wyatt in 2012.
According to a group of doctors and their loved ones, Wyatt, who was their broker, made unauthorized and excessive trades in the stock market that cost them during and after the 2008 financial crisis. Wyatt bought thinly-traded stocks for the investors and placed speculative bets on exchange-traded funds and other securities in their portfolios.
This is the latest batch of claims against Wyatt, Morgan Stanley, and managers at the Mississippi branch where he worked. The claimants believe that Morgan Stanley failed to detect warning signs of Wyatt’s purported wrongdoing. Other employees named in this securities case are adviser Hilary Zimmerman, currently a Morgan Stanley senior vice president, and branch manager Fred Eugene Brister III. The claimants contend that Brister failed to properly supervise Zimmerman and Wyatt. They say that their accounts were mismanaged and suspect trading occurred.
As if to soften the blow around the settlement, Morgan Stanley spokesperson issued a statement noting that these claimants were sophisticated and experienced investors. The firm said that the reason they were awarded only part of the damages they sought was because they chose the aggressive growth strategy for their money. The firm disagrees with the arbitration panel ruling.
The investors had asked for at least $4.4 million in damages plus other monies. The FINRA panel awarded them $1.5 million in damages, interest, over $677,000 in legal bills, and $104,000 in punitive damages.
Four other cases against Wyatt were resolved or settled without him having to admit guilt. He was found liable in two other broker fraud cases. Another two securities cases involving his alleged activities as a broker are pending.
Ex-Merrill Lynch Broker Gets FINRA Bar
In other FINRA news, the regulator has barred former Bank of America (BAC) Merrill Lynch broker Thomas Buck from associating with any member firm. Buck, who was fired by that firm and then joined RBC Wealth Management, is accused of unauthorized trading and placing clients in commission accounts that were unsuitable for them. He is no longer with RBC.
Buck was previously Merrill’s top broker in Indiana, in charge of over $1.3 billion in assets. The self-regulatory organization contends that since as early as 2009, Buck used commission-based accounts even though it would have been less costly for clients to stay in accounts that were fee-based.
FINRA’s letter of settlement said that even though 70% of the accounts in Merrill Lynch’s Indiana Complex were fee-based, some 80% of Buck’s accounts were commission-based. The regulator claims that he misled clients about supposed advantages of fee-based accounts to get them to stick to the more expensive accounts.
He is also accused of making trades for clients without getting the necessary authorization. Buck accepted the FINRA bar without denying or admitting to the securities charges.
Responding to the bar, RBC said that FINRA’s claims are not in line with what Buck told them whey they hired him. Buck’s daughter Ann Buck, whom RBC hired as part of his team, continues to work for the firm. She has not been accused of wrongdoing.
Broker Fraud
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Morgan Stanley Told to Pay More Than $2.3 Million in Arbitration Case, The Wall Street Journal, July 28, 2015
Regulators bar adviser Buck from securities industry, IBJ.com, July 28, 2015