Commentary April 13, 2022 at 07:44 AM Share & Print
What You Need to Know
- FINRA sanctioned an ex-Morgan Stanley rep who allegedly inflated the net worth and liquid net worth of eight clients.
- Through those actions, he circumvented the wirehouse’s solicitation restrictions and concentration limits for non-investment grade fixed income securities.
- Another ex-Morgan Stanley rep was sanctioned by FINRA for allegedly taking credit for revenue earned by other reps.
The Financial Industry Regulatory Authority suspended and fined a terminated Morgan Stanley broker over alleged violations related to non-investment grade bonds and unauthorized trading that included increasing the net worth and liquid net worth of eight clients.
By allegedly inflating the clients’ NW and LNW, Robert David Jr. circumvented the wirehouse’s solicitation restrictions and concentration limits for non-investment grade fixed income securities, according to the industry self-regulator.
Without admitting or denying FINRA’s findings, David signed a FINRA letter of acceptance, waiver and consent on March 31 in which he consented to be suspended from associating with any FINRA member in all capacities for 20 month and fined $15,000 for his alleged infractions. FINRA signed the letter on April 7.
David entered the financial services industry in October 2006, when he registered with Citigroup Global Markets as a general securities representative. He joined Morgan Stanley as a broker and rep in June 2009, according to FINRA.
On April 2, 2019, Morgan Stanley filed a Form U5 termination notice saying David was discharged “due to registered representative entering inaccurate client profile information relative to bond-related transactions and concerns that some of those transactions were not confirmed immediately beforehand,” according to the FINRA AWC letter.
On April 29, 2020, Morgan Stanley filed a Form U5 amendment in which it disclosed that an arbitration case was filed by one of its clients accusing David of making misrepresentations about corporate bond investments, according to FINRA.
Between December 2012 and September 2018, David falsified his clients’ account profile information in the wirehouse’s systems by falsely increasing the NW and LNW of eight clients and also changed the risk tolerance of one client’s account.
Also, from February 2015 through January 2019, David overconcentrated three clients’ accounts in non-investment grade fixed income securities, according to FINRA.
Specifically, David concentrated between about 32.72-71.18% of the clients’ liquid net worth in non-investment grade fixed income securities that FINRA said was inconsistent with the clients’ investment objectives and risk tolerances.
As a result of his actions, David violated FINRA Rules 2111 and 2010. Last, between January 2015 and February 2019, David violated NASD Rule 2510(b) and FINRA Rule 2010 by exercising discretionary trading authority to effect 538 trades in eight clients’ accounts without prior written authorization from them.
Sanctions Slapped on 1 More Ex-MS Rep
FINRA also suspended another ex-Morgan Stanley broker, in that case over allegations that he submitted transactions under production numbers that were “inconsistent with agreements with other representatives resulting in a shortfall of revenue credited to the other representatives,” according to a disclosure on his report at FINRA’s BrokerCheck website.
Without admitting or denying FINRA’s findings, William Martin Beasley signed a FINRA AWC letter on March 31 in which he consented to be suspended for one month and fined $2,500. FINRA signed the letter Tuesday.
Morgan Stanley declined to comment Wednesday about the sanctions FINRA placed on Beasley and David. Attorneys for the ex-Morgan Stanley brokers didn’t immediately respond to requests for comment.
Beasley first registered with FINRA in November 1987. On June 1, 2009, he registered with FINRA as a GSR, registered options principal, and general securities sales supervisor through an association with Morgan Stanley.
But, on June 30, 2021, Morgan Stanley filed a Form U5 termination notice, disclosing that Beasley was discharged due to allegations that he “submitted transactions under production numbers that were inconsistent with agreements with other representatives resulting in a shortfall of revenue credited to the other representatives.”
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