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Morgan Stanley Ordered to Pay Clients $519K Over Allegedly Unsuitable Recommendations

By Alex Padalka May 22, 2019

A Finra arbitration panel has ruled in favor of a New Mexico couple claiming they were put into unsuitable investments by a Morgan Stanley financial advisor, the industry’s self-regulator says.

In a claim filed in 2016, Stephen and Brenda Balok alleged that the wirehouse engaged in deceptive trade practices, negligent misrepresentation and supervision and breaches of fiduciary duty and contract that resulted in losses in eight of their accounts held with Morgan Stanley, according to an arbitration award document published by Finra.

The Baloks claimed they were persuaded to buy complex instruments such as individual junk bonds, option contracts and ETFs that invested in derivatives and futures, the regulator says.

The arbitration panel ordered Morgan Stanley to pay $519,089 in compensatory damages plus 8.75% annual interest starting from April 5, 2019 until paid in full, according to the award document. The panel also denied Morgan Stanley’s request to expunge the record of the broker, identified in the award document only as “Prouty.”

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A Timothy John Prouty has been registered with Morgan Stanley in Albuquerque, N.M., since 2009, according to BrokerCheck.

He has one pending customer dispute on his record from December 2016 alleging “unsuitability with respect to investments in managed accounts” from July 2012 to June 2015.