Morgan Stanley last Thursday was dealt one more blow in its effort to overturn a 2019 Finra arbitration panel decision that ordered the firm to pay $3.3 million to investors in a Puerto Rico bond case, most of it because the firm allegedly concealed evidence in a hearing.
Plaintiff's attorneys routinely grumble that broker-dealers can be far from forthcoming in turning over documents during arbitration, dragging their feet during discovery. This claim, and the large award, highlights the issue.
After that July 2019 decision by the Financial Industry Regulatory Authority Inc. panel, Morgan Stanley appealed the arbitration decision and lost, with a federal judge in Florida this April tossing the firm's motion to appeal.
Last week, the U.S. Court of Appeals for the 11th Circuit affirmed the earlier ruling. The investors who sued Morgan Stanley are Isabel Litovich-Quintana and Jose A. Torres.
"The award was for $3 million in sanctions, the largest [for sanctions] in Finra history," said Jeff Erez, the attorney for the two plaintiffs in the claim. "We sued Morgan Stanley for losses in Puerto Rico bonds. The adviser was fired. We had gotten an order for documents related to his termination and Morgan Stanley produced virtually nothing."
"We are disappointed with the decision and continue to believe that the panel’s award of monetary sanctions in this case was unfounded, unreasonable and exceeded the power of the arbitrators," said a spokesperson for Morgan Stanley about the appeal.
Meanwhile, Morgan Stanley said on Monday it had hired Sterling Shea from Barron's to work as a managing director, head of practice strategy for wealth management. He had been at Barron’s for 23 years and led both the editorial and commercial functions of the wealth management unit, which focused on covering the advisory, wealth management and asset management sectors globally.
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"The outcome is correct, but it's disappointing that FINRA had ample opportunity to investigate the merits of clients' allegations in these claims, including the testimony in the three investor arbitrations with hearings," Jeff Erez, a plaintiff's attorney representing a large portion of the Stifel clients, said.
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