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.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

Events

The business case for hiring NextGen talent

Firms hiring nextgen talent have reaped the benefits from greater productivity to revenue growth. Clearly, there's a business case to be made for hiring millennials. Kate Healy of TD Ameritrade breaks it down.

Latest news & opinion

Retirement planning for women

Longer lifespans and lower savings require creative income strategies.

Sean Spicer resigns as press secretary after Anthony Scaramucci is appointed communications director

Scaramucci is known as an ardent foe of the DOL fiduciary rule, having said during the campaign that Trump would repeal it .

Redoing the math on a 4% retirement withdrawal rate

Given the current interest-rate environment and other factors, advisers disagree about whether the number is too conservative or not conservative enough.

House panel passes bill to replace DOL fiduciary rule with one requiring disclosure of conflicts

Measure likely to continue in partisan advance in House, but could stall in Senate.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print