Commentary May 18, 2022 at 07:44 AM Share & Print
What You Need to Know
- Two ex-Morgan Stanley brokers were suspended and fined by FINRA for multiple securities violations.
- They allegedly made misleading statements about investments to hundreds of Morgan Stanley clients and prospective clients.
- One of them was fined $27,500 and given a 14-month suspension. The other was fined $10,000 and suspended a year.
Two former Morgan Stanley brokers were suspended and fined by the Financial Industry Regulatory Authority after they were terminated by the wirehouse for, among other violations, making misleading statements to clients and prospective clients.
Each of the ex-Morgan Stanley reps signed a FINRA letter of acceptance, waiver and consent in which he consented to the industry self-regulating group’s sanctions.
Morgan Stanley declined to comment on Wednesday. Zamani and Zotenko didn’t immediately respond to requests for comment.
Over $360K Earned
In August 2016, Zamani first became associated with a FINRA member, Morgan Stanley, and on Jan. 18, 2017, he became registered as a general securities representative through his association with the wirehouse.
But, on May 29, 2020, Morgan Stanley filed a Form U5 Uniform Termination Notice disclosing it discharged Zamani over “concerns that the representative sent email to many client prospects with content about an investment opportunity, after he had sought approval for the content of the email and not received it, and took steps to avoid further review of the email by the Firm,” according to a disclosure on his report at FINRA’s BrokerCheck website.
Between January 2017 and April 2020, while registered through Morgan Stanley, Zamani participated in an outside business activity, by owning and operating a firm that offered subscription-based investment content, and earned more than $360,000 from that activity, according to FINRA.
Additionally, between August 2016 and April 2020, in connection with his outside business activity, Zamani “disseminated investment-related communications to the public,” including Morgan Stanley clients, according to FINRA.
The latter communications “failed to comply with the content standards of FINRA Rule 2210 because, among other things, they contained misleading and promissory statements and made recommendations without providing a sound basis for evaluating the facts,” FINRA alleged.
Zamani also, between June 2018 and April 2020, used a personal text messaging application that wasn’t approved by Morgan Stanley to engage in business-related communications with two clients of the firm, according to FINRA. As a result, he allegedly caused Morgan Stanley to maintain incomplete books and records in violation of Section 17(a) of the Securities Exchange Act and Rule 17a-4.
As a result of his actions, Zamani violated FINRA Rules 2010, 2210, 3270 and 4511, it alleged.
By signing his AWC letter, Zamani also consented to the entry of findings that he “sent emails describing an investment opportunity through his firm email account to over 600 prospective customers, without submitting the content of these retail communications for firm approval,” according to FINRA.
Private Placement Pitch
Zotenko first registered with FINRA in August 2015 as a general securities representative through Morgan Stanley. On May 24, 2021, Morgan Stanley filed a Form U5 terminating his registration.
He was terminated over “concerns that the representative sent email to many client prospects with content about an investment opportunity, after he had sought approval for the content of the email and not received it, and took steps to avoid further review of the email by the Firm,” according to FINRA.
From Jan. 19, 2021, to Feb. 3, 2021, Zotenko drafted and sent to prospective retail clients more than 1,150 retail communications concerning a private placement investment opportunity, FINRA alleged.
Those “communications violated the content standards for member communications with the public because they contained statements that were misleading and unwarranted,” according to FINRA. “In addition, the communications lacked balance and failed to provide a sound basis to evaluate the private placement investment,” FINRA said.
Zotenko failed to obtain the approval of a registered principal of his firm prior to sending the retail communications. On Feb. 1, 2021, after sending over 600 of the retail communications at issue, he “belatedly sought his firm’s approval of the content of the message but his firm denied approval because, among other things, the message contained promissory statements,” according to FINRA.
Despite that denial of approval, Zotenko sent about 550 additional messages on Feb. 2–3, 2021, violating his firm’s policies. He also “circumvented the firm’s supervisory controls by falsely affirming in the firm’s internal system that he did not intend to send the messages” to more than 25 prospective customers, FINRA alleged.
The retail communications all contained the same content, describing what Zotenko referred to as an “Exclusive Venture Capital Investment Opportunity,” according to FINRA.
The communications did not specify the name of the investment opportunity but they “described a private placement investment that Morgan Stanley offered, which was designed to build a portfolio of venture capital funds that invest in certain business sectors,” FINRA alleged.
As a result of his actions, Zotenko violated FINRA Rules 2010 and 2210, it said.