Expense Report Costs Morgan Stanley Veteran Her Career
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.