FINRA Lawsuit Lawyer Assistance

Should You Sue Your Broker-Dealer Over Your Investor Losses From Morgan Stanley’s Covered Call Options Strategy?

Broker-Dealer Ordered To Pay$11.5M After Losing FINRA Lawsuit

A Financial Industry Regulatory Authority (FINRA lawsuit) arbitration panel has ordered Morgan Stanley to pay one investor $11.5M in damages over losses sustained by using a covered call options strategy. The panel’s ruling also awarded the claimant $157,656.81 in costs and $400 in arbitration fees.

In his FINRA lawsuit, the investor alleged negligence, unauthorized trading, breach of fiduciary duty, failure to supervise, breach of contract, and fraud. He contends that he sustained “lost opportunity damages” or “foregone gains” when certain stocks, including Apple Computers, Tesla Motors, Microsoft, and others, were “called away” from his account. His Morgan Stanley financial advisor was Craig Sherman Thislethwaite in Ohio, also of the firm’s The Fox Thislethwaite Group.

This claimant is not the only wealthy Morgan Stanley customer to suffer significant investor losses in a covered call options strategy. Investors who worked with Morgan Stanley broker Anthony Michael Gallea, who is also head of the firm’s Pelican Bay Wealth Group, have also filed FINRA lawsuits. The North Carolina financial advisor notes on Morgan Stanley’s website that nearly 50% of his $3B book of business involves covered call-writing strategies.

Our options strategy investor loss attorneys are offering free, no-obligation case assessments to Morgan Stanley clients seeking to determine whether they have grounds for a securities arbitration claim for damages against the firm. Contact Shepherd Smith Edwards and Kantas (investorlawyers.com) today.

What Is a Covered Call Options Strategy?

This is an options strategy in which a seller offers buyers a call option at a fixed price and expiration date on one of the seller’s securities. The covered call option’s holder can then sell that stock at the strike price. However, the call option’s seller would still own the underlying securities.

A covered call options strategy is often used by investors wanting to make money and who believe stock prices are unlikely to go up much more in the near future. A covered call is set up by holding a long position in a stock and then writing/selling the call option on that asset. However, not only does a covered call limit how much an investor can make, but also it may not provide much in the way of protection should the stock price plunge. Such losses can be huge, even unlimited.

Also, it is important to know that covered call investors also may stand to suffer losses if the underlying stock rises too fast. Not only can losses from a covered call options strategy be massive, but they may even wipe out an entire portfolio.

While financial advisors have been known to persuade investors with long-term concentrated stock positions to think of a covered call strategy as a conservative hedge, this is not the case. The writing of covered calls is not a strategy that lowers risks. Instead, it creates new risks.

What Are A Few Possible Signs That You May Have Grounds for a Covered Call Strategy Investor Loss Claim?

• You were unsuitably marketed and sold this options strategy. You did not have the risk tolerance level or the kind of investment portfolio that could handle this covered call approach. Or, this covered call strategy was never in line with your investment goals. For example, you never needed the tax liability or income that can come with writing covered calls.
• You never fully understood the risks involved with writing covered calls, including that you could lose your entire principal if stocks went up too fast. Your broker may have even misrepresented the risks to you.
• You sustained covered call options losses in the six figures or higher.

Proving broker misconduct or negligence can be difficult. The best way to determine whether you do have grounds for a FINRA lawsuit against Morgan Stanley or another broker-dealer that used a covered call options strategy is to speak with a seasoned investor loss attorney today.

Shepherd Smith Edwards and Kantas have decades of experience fighting for investors against big Wall Street Firms. Should we agree to work together we will file your securities litigation case for you and represent you before a panel of FINRA arbitrators.

Call (800) 259-9010 today.