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September 26, 2017

Expense Report Costs Morgan Stanley Veteran Her Career

by Mason Braswell
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Enforcement
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Morgan Stanley
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Comments (8)
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Expense Report Costs Morgan Stanley Veteran Her Career
wutwhanfoto/iStock/Getty images

A former Morgan Stanley corporate stock plan manager accepted an industry bar this week, making her the latest casualty of regulatory concern about expense account improprieties.

Barbara Waters, who managed 35 administrators at Morgan Stanley Wealth Management’s equity compensation outsourcing group in New York, declined to participate in a Financial Industry Regulatory Authority investigation of the firm’s U5 filing on her dismissal in October 2015.

Morgan Stanley reported that she was fired over an allegation that “event attendees on employee’s expense report incorrectly included one person who did not attend event.”

Waters, who worked at the firm and its predecessor Smith Barney for 11 years, said in an email that Morgan Stanley never elaborated on what she did wrong in relation to the approximately $250 expense submission involving four people.

The only disclosures on her BrokerCheck record relate to the incident and her failure to cooperate with Finra’s investigation of it.

Her industry bar technically stems from her refusal to provide on-the-record testimony to Finra enforcement officials, triggering violations of its Rule 8210 requiring cooperation with investigations and of Rule 2010 requiring reps to observe “high standards of commercial honor and just and equitable principles of trade,” according to the consent letter that Waters signed without admitting or denying the findings.

The underlying message of the bar, however, is that brokers should be on high alert regarding what they may think are mere peccadilloes, including minor expense report improprieties, some lawyers said.

“This is clearly a focus for Finra and they view them as easy cases,” Marc S. Dobin, a Jupiter, Fla.-based securities lawyer, said in an email.

A spokeswoman at Finra, which has a central review group that routinely follows up on arbitration claims and U5 commentary, declined to comment on the Waters case or Dobin’s remarks.

Firms that Finra can lasso in over supervisory and books-and-record lapses related to such cases appear to be taking notice, however.

Morgan Stanley suspended a broker in Idaho in December who it alleged had charged $273 of meals with his daughter to his expense account. A high-powered, $1.4 billion-asset broker at Merrill Lynch lost his post at the firm last this year over alleged expense account violations and was dismissed from an RIA firm earlier this year after Finra opened an investigation into his expense account usage.

Waters, who had been a registered rep for 25 years, said she couldn’t afford to fight her dismissal or to take the time to work with the regulator. Now a director of equity compensation at Aetna, Inc., she had worked at Merrill from 1991 to 1998 before joining Smith Barney,  according to BrokerCheck.

“[A]fter 24 years I was just dismissed,” she said in her email, noting that the firm said the alleged expense-account mishap occurred one year before she was given notice.

A spokeswoman for Morgan Stanley did not immediately return a request for comment.

Dobin said he is aware of other former reps who simply threw in the towel rather than go through Finra regulatory probes, but he also noted that enforcement notices and U5 comments from firms don’t always tell the whole story.

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Comments (8)
  • on Sep 26 2017, Seriously... says:

    Another reason to support the CFP Board in their effort to make Financial Advisor a profession. There needs to be avocation for the rights of the individual advisor to stand up against firms that abuse regulations to make a profit at the expense of their employees/contractors. You do not see Realtors getting fired/barred for menial human errors. Tired of seeing companies abuse employees in this fashion; decades of commitment to their employer to be dismissed for insignificant cause.

    > Reply to Seriously...
    • on Sep 26 2017, bru08 says:

      Couldn’t agree more! Pretty said indeed.

      > Reply to bru08
  • on Sep 26 2017, Phil says:

    Welcome to an over-(self)regulated industry in which the gift amount hasn’t been adjusted for inflation in, what, 20 years? Please.

    > Reply to Phil
  • on Sep 26 2017, Deeann Griebel says:

    I am a bit surprised she didn’t defend herself in front of FINRA? This sounds very defensible….

    > Reply to Deeann Griebel
    • on Sep 27 2017, Phil says:

      Deeann – It appears from the article that she has moved on to another career. That, and the time and expense of defending yourself in an arbitration against a firm with salaried lawyers would probably discourage most people, however innocent or minor the infraction, from defending themselves.

      > Reply to Phil
  • on Sep 27 2017, Deeann Griebel says:

    But my dad taught me that DEFENDING your REPUTATION was worth “selling the ranch” (a slang he used to reflect “selling everything to fund the fight”)…..but, maybe she was just tired of the industry and ready to move on–so, you make a good point. But, in my case, during FINRA’s investigate of me it was important to defend my honor and it was cool to see them completely close the case with no action :)–but, you are right, ‘to each his own’.. By the way, legal fees really are not that much–$45,000 goes a long way and I would think an experienced advisor could easily have a $1 million net worth so we may be talking about only 4 to 5% of their net worth to defend their honor. BUT–again, she may have just ‘had it’ with the industry and decided to walk away from it–so, I agree “to each his/her own”…/good point, Phil/dee

    > Reply to Deeann Griebel
    • on Sep 27 2017, Original_Bankster says:

      Except it does not mention anywhere on the article that she was a financial advisor. Your pops gave you great advice, but I still think that you have to pick and choose your fights. If she did fight it and beat it, she probably would have still been salty about the whole experience/industry anyway. You defend your honor for what? To still be pissed off that your firm didn’t do anything to help you out anyway? Sometimes it’s more comforting to know that you have someone on your corner and that you aren’t fighting these bs claims on your own.
      I would have taken my talents somewhere else too.

      > Reply to Original_Bankster
  • on Sep 28 2017, John Dunn says:

    It’s just no fun anymore.

    > Reply to John Dunn

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