Finra Slaps Ex-Morgan Stanley Broker Who Made DIY Settlement with Customer
The Financial Industry Regulatory Authority has fined a former Morgan Stanley broker in Rolling Hills, California, for his do-it-yourself attempt to settle a client’s complaint about an investment gone awry.Eric Nichols agreed this week to pay $5,000 and serve a 15-day suspension from the brokerage industry for violating industry standards by writing $28,000 of checks to the customer without telling his employer. Morgan Stanley had fired Nichols in February over the incident.
The customer had complained verbally and in writing to the broker last August about “significant” unrealized losses and the suspension of dividends in the preferred stock of a single issuer that Nichols had recommended two years earlier. The customer also made unsolicited investments in the stock, according to a letter of acceptance, waiver and consent that Finra posted this week.
Morgan Stanley knew about the complaints, but not about Nichols’ “settlement,” according to the document. His action violated Finra’s Rule 2010 requiring brokers to “observe high standards of commercial honor,” it said.
The relatively light sanctions indicate that Finra enforcement officials factored in Nichols’ discharge, said a broker employment lawyer who declined to be identified.
Nichols, who began his brokerage career in 1996 at H&R Block, worked at Morgan Stanley and predecessor firm Smith Barney for almost 18 years. He has not been registered with Finra since his dismissal, according to his BrokerCheck history.
Nichols, who signed the consent order without admitting or denying the findings, could not be reached for comment.
His BrokerCheck record includes three unrelated customer complaints. One alleging unauthorized trading between 2009 and 2016 was closed with no action taken, a second alleging unsuitability was settled for $95,000 and a third filed this year that alleges unsuitable recommendations to buy real estate investment trusts is pending.