Ex-Morgan Stanley Broker Who Fought Firm Ordered to Repay Note
(Adds comment from Smith’s lawyer in fifth paragraph.)
A former Morgan Stanley broker who spent just five months at the firm was ordered to repay two promissory note-backed loans worth $513,600, according to an arbitration award published Wednesday by the Financial Industry Regulatory Authority.
The panel denied Michael Patrick Smith’s claim that Morgan Stanley made misrepresentations and fraudulently induced him to join the firm in 2013, according to a stipulated award. Smith had asked to have the notes forgiven and for payment of $600,000 in damages.
The Finra arbitrators ordered him to pay $108,304 in costs and Morgan Stanley attorneys’ fees, in addition to return of the upfront loans.
The panel did not provide a reason for its decision in the case. Lawyers say it is rare for brokers to prevail on counterclaims without written and evidence and documentation of promises made during recruiting.
Smith decided to settle the case in order to avoid the “prohibitive” cost of litigation, said his lawyer, Aaron A. Wernick of Furr Cohen P.A. in Boca Raton.
“Mr. Smith chose to settle the matter as opposed to litigate even though he felt that his counter-claims were strong,” Wernick said.
Smith’s case is notable given that he joined Morgan Stanley in Boca Raton, Florida, on June 21, 2013, and left on November 20, according to his BrokerCheck history.
Smith began his brokerage career in 2008 at the GMS Group Inc. in Boca Raton, Fla., where he worked until joining Morgan Stanley. After leaving the wirehouse, he worked for six months at Oppenheimer & Co., but is not currently registered with Finra.
He has one complaint on his record that was filed in July 2013, shortly after his arrival at Morgan Stanley. The complaint seeking $11,043 in damages over misrepresentation of a security purchased in August 2012 was denied, according to BrokerCheck.