The Financial Industry Regulatory Authority has suspended a former Morgan Stanley general securities representative for two months and fined him $5,000 for allegedly submitting “numerous expense reports seeking reimbursement of business meals that he knew included false information about the attendees at those meals,” according to FINRA.
Without admitting or denying the findings of FINRA’s investigation, Kerry M. Moy signed a letter of acceptance, waiver and consent Feb. 10 in which he consented to the imposition of the fine and suspension. FINRA signed the letter Thursday.
Moy was registered with Morgan Stanley from August 2012 to June 2019, according to FINRA. On June 10, 2019, Morgan Stanley filed a Form 5 Uniform Termination Notice disclosing he was terminated from the firm for, among other things, “[c]oncerns regarding the representative’s submission of inaccurate information for business expenses.”
In a comment by Moy on his report at FINRA’s BrokerCheck website, he denied Morgan Stanley’s allegations. “The firm terminated my employment in its rush to judgment, and for pretextual reasons, to distance itself from a lawsuit wholly unrelated to my position as a financial advisor and instead, related to my approved restaurant activities,” he said.
Moy also filed a multimillion-dollar claim against Morgan Stanley for wrongful termination, he noted.
Morgan Stanley declined to comment on Monday. Moy did not immediately respond to a request for comment.
Moy is no longer registered as a broker but is still registered as an advisor, according to his BrokerCheck report. After leaving Morgan Stanley he became registered with Western International Securities as an advisor. He is also CEO and founder of Moy Wealth Advisors in Pasadena, California.
Meanwhile, a customer dispute on Moy’s BrokerCheck report is still pending in which a client “alleged, inter alia, misrepresentation with respect to investments” from 2015 to 2018. That client is requesting $14 million in damages.
If nothing else, the case serves as a reminder to advisors that they need to be as accurate as possible when filling out expense reports.
Moy submitted the expense reports in question between July 1, 2014, and May 17, 2019. Morgan Stanley required employees and associated persons to include the names of all attendees when submitting expense reports seeking reimbursement of business meals, FINRA noted.
“Moy delegated the preparation of expense reports to his assistant, but Moy often neglected to inform his assistant of the names of the clients or prospective clients who had attended business meals with him,” according to the FINRA AWC letter. “When this occurred, Moy’s assistant would insert randomly selected names of her choosing on Moy’s expense reports,” the AWC letter said.
Moy knew that was “his assistant’s practice,” but he still “failed to correct those reports to list the actual attendees of the business meals and instead submitted the deliberately inaccurate expense reports for reimbursement,” according to FINRA.
If Moy had submitted the expense reports with the correct names of those attending the meals, the underlying expenses would have been reimbursable under Morgan Stanley’s business expense policies, FINRA noted.
By submitting expense reports that he knew included false information, Moy violated FINRA Rule 2010 (governing standards of commercial honor and principles of trade), FINRA alleged.
Business meal expense deductions became more complicated under the Tax Cuts and Jobs Act of 2017. Client business meals continued to be 50% deductible under the new law if the taxpayer was present and the meals were not lavish or extravagant. However, business meals associated with non-deductible entertainment became an expense that had to be purchased separately from the entertainment to qualify for a deduction, according to PwC