Couple files Finra arbitration claim against Morgan Stanley in connection with energy investment

Attorney claims his clients lost more than $100,000 as U.S. oil prices collapsed

Mar 8, 2016 @ 1:28 pm

By Christine Idzelis

+ Zoom

A retired couple from North Carolina has filed an arbitration claim against Morgan Stanley, alleging it failed to adequately disclose the risks involved in a proprietary energy-related investment in which they've lost more than $100,000, according to the law firm representing them.

The White Law Group filed the claim with the Financial Industry Regulatory Authority Inc., alleging common law fraud, negligence and breach of fiduciary, according to a statement released Monday.

A Morgan Stanley broker invested about $150,000 of the married couple's $212,000 account into the Morgan Stanley Cushing MLP High Income ETN — an exchange-traded note tied to master limited partnerships that hold energy and shipping assets, according to D. Daxton White, a managing partner with the law firm.

The husband, age 67, is a disabled Vietnam veteran and his wife, 64, is a retired school teacher, Mr. White said in a phone interview, estimating they've lost more than $100,000.

“The clients did not understand the extent that they could lose their principal, nor could they afford to,” Mr. White said. “They were told this would be an income-producing investment.”

Christy Jockle, a spokeswoman for Morgan Stanley, didn't immediately respond to a request for comment.

Shares of the investment began a steep decline in the second half of 2014 as U.S. oil prices collapsed. They've dropped more than 65% since October 2014, according to the statement from White Law. The ETN issued by Morgan Stanley provides investors with quarterly coupon payments that can vary based on the performance of the MLPs it tracks.

Before recommending an investment, a broker-dealer has the responsibility to adequately disclose the risks and to perform the due diligence needed to determine whether it's suitable based on factors such as a person's age, net worth and objectives, the law firm said.

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