Morgan Stanley loses appeal of $3.3 million Finra arbitration

Morgan Stanley loses appeal of $3.3 million Finra arbitration
The wirehouse sought to toss a large award it lost to investors who owned Puerto Rican bonds
APR 13, 2020

A federal judge in Florida last week tossed Morgan Stanley's motion to appeal a $3.3 million Finra arbitration award it lost to investors in battered and beleaguered Puerto Rican bonds.

Last July, Financial Industry Regulatory Authority Inc. arbitrators ordered Morgan Stanley to pay $3.3 million to investors in a Puerto Rican bond case, most of it because the firm allegedly concealed evidence in a hearing.

The investors who sued Morgan Stanley are Isabel Litovich-Quintana and Jose A. Torres.

Morgan Stanley "argues the arbitration panel exceeded their powers by awarding $3,000,000 in sanctions," federal Judge Marcia G. Cooke wrote in an order issued last Wednesday. The firm "reasons that the award was excessive and punitive, which they allege is prohibited under applicable law," according to the order.

The court concluded that Morgan Stanley failed to meet its burden to establish the existence of any one of the four statutory grounds to vacate the arbitration award, according to the order.

“We disagree with the district court’s decision in this case,” Morgan Stanley spokesperson Christine Jockle wrote in an email.

By denying Morgan Stanley’s motion to vacate, the court affirmed that arbitrators have free rein to make large sanctions awards, said Jeff Erez, the attorney for the two plaintiffs in the claim.

“The court here is saying the latitude is very broad,” Erez said. “This bolsters arbitrators’ authority in Finra arbitrations.”

It is another decision that indicates that “courts will not second-guess arbitrators,” he added.

Latest News

Maryland bars advisor over charging excessive fees to clients
Maryland bars advisor over charging excessive fees to clients

Blue Anchor Capital Management and Pickett also purchased “highly aggressive and volatile” securities, according to the order.

Wave of SEC appointments signals regulatory shift with implications for financial advisors
Wave of SEC appointments signals regulatory shift with implications for financial advisors

Reshuffle provides strong indication of where the regulator's priorities now lie.

US insurers want to take a larger slice of the retirement market through the RIA channel
US insurers want to take a larger slice of the retirement market through the RIA channel

Goldman Sachs Asset Management report reveals sharpened focus on annuities.

Why DA Davidson's wealth vice chairman still follows his dad's investment advice
Why DA Davidson's wealth vice chairman still follows his dad's investment advice

Ahead of Father's Day, InvestmentNews speaks with Andrew Crowell.

401(k) participants seek advice, but few turn to financial advisors
401(k) participants seek advice, but few turn to financial advisors

Cerulli research finds nearly two-thirds of active retirement plan participants are unadvised, opening a potential engagement opportunity.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today’s choppy market waters, says Myles Lambert, Brighthouse Financial.

SPONSORED Beyond the dashboard: Making wealth tech human

How intelliflo aims to solve advisors' top tech headaches—without sacrificing the personal touch clients crave