Morgan Stanley Ordered to Pay $519K to Retired Couple

Originally published by P. Clarkson Collins Jr..

A Financial Industry Regulatory Authority (FINRA) arbitration panel has awarded $519,000 to Stephen and Brenda Balock in their investor fraud claim against Morgan Stanley (MS). The couple contends that that one of the firm’s brokers, Tim J. Prouty, placed their funds in investments that were complex and inappropriate for them, causing them to lose money in eight accounts between 2012 and 2015. They filed their claim against Morgan Stanley in 2016.

The Balocks began working with Prouty after Stephen’s employer, the Public Service Co. of New Mexico, compelled him into early retirement due to downsizing. He had never worked with a broker before then.

The couple wanted to invest in certificates of deposit. Instead, Prouty placed them in a Morgan Stanley investment advisory program that involved more complex investments, such as options contracts, derivates, junk bonds, and exchange-traded funds. In their investor claim against Morgan Stanley, the Balocks made a number of allegations, including the following:

• Breach of fiduciary duty
• Negligent misrepresentation
• Unsuitability
• Deceptive trade practices
• Negligent supervision
• Control personal liability

The Balocks argued that Morgan Stanley did not supervise the investments chosen by Prouty, who allegedly acted as if the couple were sophisticated investors rather than unseasoned investors and retirees. The claimants believe that their portfolio could have gained $519,000 more than what it had made during the period at issue if only their investment were placed in more traditional securities, including equities and bonds.

Morgan Stanley disagrees with the FINRA arbitration panel ruling and claims that it was the Balocks who wanted to get involved in the more complex investments. The broker-dealer claims that no wrongdoing took place.

Unsuitable Investments

Some investments are too risky and volatile, especially for the retail investor or typical retiree. If you are an inexperienced investor, it is important that your financial adviser not only takes steps to make sure that an investment is right for you, but that you understand what you are getting into, including the risks you may be exposing yourself to financially.

If you were in Morgan Stanley’s advisory program and purchased such risky investments as junk bonds, options, or ETFs, please reach out to the securities attorneys at Shepherd, Smith, Edwards & Kantas. Our law firm has a team of attorneys and consultants with more than 100 years of combined experience in the securities industry and securities law. We use that experience to help investors recover wrongful losses through FINRA arbitration or other legal processes. All communications will be kept strictly confidential and your consultation will be done with no charge or obligation to you.

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