ETF Sales by Morgan Stanley Lead to $1.75 Million FINRA Fine

ETF Sales by Morgan Stanley Lead to $1.75 Million FINRA Fine 150 150 Rex Securities Law

May 1, 2012, FINRA fined Morgan Stanley $1.75 million, censured the firm
and ordered restitution of $604,584 to customers for selling leveraged
and inverse exchange-traded funds (non-traditional ETFs) “without
reasonable supervision”.

The letter of acceptance waiver and consent between FINRA and Morgan Stanley contains the following findings:

  • Morgan Stanley consented to a fine of $100,000 in April 2011 for supervisory issues related to the sale of unit investment trusts
  • In March 2009, they were fined $3 million and required to pay restitution of $2 million to retirees on findings relating to unsuitable investments in IRA and retirement accounts
  • In June 2007, they were fined $500,000 for inadequate supervision regarding the monitoring of guardian accounts established for minors in connection with medical malpractice settlements
  • From January 2008
    to June 2009 the company failed to maintain a supervisory system in
    connection with the sale of non-traditional ETF’s such as leveraged, inverse and inverse-leveraged exchange traded notes
  • Certain Morgan Stanley brokers did not have an adequate understanding of
    non-traditional ETFs before recommending these products to customers
  • Certain Morgan Stanley brokers made unsuitable recommendations of non-traditional ETFs to investors with a primary investment objective of income
  • During the time frame examined by FINRA Morgan Stanley customers bought and sold over $4.78 billion of non-traditional ETFs
  • Certain
    customers with a primary objective of income held non-traditional ETFs for several months including a 74
    year old  with a  net worth of less than $300,000 who was sold a single ETF representing 25% of his account value which lost $13,000 and an 89 year old customer with a primary objective of income and a net worth of under $200,000 who was allocated over 59% of the account to a single non-traditional ETF

you are a
conservative investor who has suffered losses on ETFs purchased from Morgan Stanley
or any other brokerage firm, you may be able to recover those losses.
Please contact our
office to discuss your legal rights. Nationwide representation. Free
consultation. 561 391 1900.


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