Finra arbitrators ordered Morgan Stanley and a former financial adviser at the firm to pay $160,000 each in damages to a Mexican farmer for allegedly making inappropriate recommendations about risky investments.
Carlos Ramon Tapia Sanchez, a farmer in Hermosillo, Mexico, sold his operation in 2015. The next year, he invested the proceeds in junk bonds that didn't fit his risk profile that were pushed by his long-time broker, according to Sanchez's attorney, Burt Newsome.
Sanchez worked with Morgan Stanley registered representative Francisco Javier Valenzuela in the firm’s Tucson, Arizona, office. Sanchez, who is now 70, lost about $368,000 on the investments, Newsome said.
Sanchez filed an arbitration claim against Morgan Stanley on Oct. 21, 2020, and against Merrill Lynch on Feb. 10, 2021. Valenzuela left Merrill Lynch in 2015 to join Morgan Stanley. In his claim, Sanchez cited elder abuse, misrepresentation and failure to supervise, among other causes of actions.
A three-person Financial Industry Regulatory Authority Inc. arbitration panel found Valenzuela liable for misrepresentation, manipulation and fraud, according to a May 26 arbitration award. The arbitrators found Morgan Stanley liable for negligence and failure to supervise. Valenzuela and Morgan Stanley were each ordered to pay Sanchez $160,000 in compensatory damages.
They held Morgan Stanley and Valenzuela jointly and severally liable for $10,000 in attorneys’ fees, resulting in a $330,000 total award for Sanchez, who had sought $357,622 in compensatory damages and attorneys’ fees.
“We’re pleased and grateful for the result,” said Newsome, owner of an eponymous law firm in Birmingham, Alabama. “My client was treated horribly by Morgan Stanley. I’m glad he was able to get justice.”
A Morgan Stanley spokesperson declined to comment. Valenzuela left Morgan Stanley in 2018; Finra barred him from the industry the same year, according to his BrokerCheck profile.
Sanchez voluntarily dismissed all claims against Merrill Lynch on March 30, which obviated the need for the arbitration panel to make a ruling with respect to Merrill on Sanchez’s claims.
Supervision vice chair speaks following recent launch of AI adoption practices by regulators.
In an era of AI euphoria and market FOMO, getting back to basics with fixed income may be the most contrarian and most important move advisors can make.
Voya Financial adds private equity, credit and real estate options to its AMA program, building on support for looser federal investment rules in retirement accounts.
Shannon Reid, president of Osaic and the network’s number two executive, has plenty of challenges, industry executives said.
Auditors flagged the commingling. The COO allegedly knew. Investors kept getting the pitch
Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income
Direct indexing is on pace to outgrow ETFs and mutual funds. Northern Trust's Ken Lassner explains why the advisors who get it wish they had started sooner.
