Finra panel awards $454,813 to lawyer who says Morgan Stanley mismanaged retirement fund

Plaintiff alleges broker used too much cash, failed to diversify

Apr 30, 2019 @ 4:49 pm

By Mark Schoeff Jr.

A Finra arbitration panel awarded $454,813 to a lawyer in a case against Morgan Stanley over how the brokerage managed his retirement fund.

The Carpenter Law Firm defined-benefit plan alleged that Morgan Stanley failed to devise an appropriate investment strategy, "which caused the portfolio to underperform due to excessive cash and a concentration in a single sector of the S&P," the Financial Industry Regulatory Authority Inc. award states.

The three-person, all-public arbitration panel ruled that Morgan Stanley and broker Michael Lee Canney were jointly liable, assessing $415,888 in compensatory damages, $36,500 in expert witness fees, $2,000 in costs and a $425 claim-filing fee.

The law firm had asked for $667,723 in compensatory damages. The statement of claim was filed in March 2018. The decision was signed Monday.

The Carpenter Law Firm attorney, who was based in Des Moines, Iowa, turned his retirement portfolio over to Mr. Canney in 2007, according to the attorney's lawyer, Gail Boliver. In late 2017, the lawyer became concerned that the portfolio had been misallocated for 10 years.

"The individual broker seemed to market-time," said Mr. Boliver, owner of the Boliver Law Firm in Marshalltown, Iowa. "He was out of the market in cash at the beginning of the account and at the end of the account."

The problem was compounded, Mr. Boliver said, by the broker's purchase of close-end Morgan Stanley funds for more than half of the portfolio.

The award states that Morgan Stanley denied the allegations. A Morgan Stanley spokeswoman was not immediately available for comment. The brokerage's internal counsel represented both the firm and Mr. Canney.

Mr. Boliver faulted the Morgan Stanley office in Des Moines for not paying close enough attention to Mr. Canney's portfolio decisions.

"Where was the supervision?" Mr. Boliver said. "That should have saved Morgan Stanley."

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