Massachusetts Fines Morgan Stanley for Broker’s Excessive Trading
Massachusetts’ top securities cop on Wednesday ordered Morgan Stanley to pay $382,500 for failing to properly supervise a now-barred Boston broker accused of churning client accounts.In an order released by Secretary of the Commonwealth William Galvin, Morgan Stanley consented to findings that complex managers, compliance personnel and other supervisors of Justin E. Amaral “closed out” most alerts of excessive trading in his clients’ accounts after he stated that the alerts reflected poor markets and account rebalancing.
The wirehouse agreed to a $200,000 fine and to repay $182,500 to four clients in the state, according to the order. It stated that Morgan Stanley’s supervisors failed in their duty to monitor Amaral’s trading activity by improperly closing 97 alerts generated over four-and-a-quarter years beginning in January 2010.
Morgan Stanley permitted Amaral to voluntary resign in May 2014 amid allegations involving his role as an executor and beneficiary in a client’s estate and his use of discretion in some accounts, according to his BrokerCheck history. Finra barred him from the industry in June 2014 for failing to appear to testify in its investigation of his activities.
Morgan Stanley did not open an investigation into Amaral’s activities until a customer’s accountant filed a complaint in April 2014, according to Galvin, and has been settling complaints of excessive trading from individual clients on a case-by-case basis over the years. It has paid $382,000 to settle three claims that cumulatively sought $929,000, according to Amaral’s BrokerCheck history.
“We are pleased to resolve this matter which arose out of conduct from a financial advisor whose employment ended in May 2014,” Morgan Stanley spokeswoman Christine Jockle said in a statement.
Amaral could not be reached for comment.
He began his12-year brokerage career in 2001 at Morgan Stanley Dean Witter, joined Smith Barney for two-and-a-half years in 2007 and migrated back to Morgan Stanley when it absorbed the Citigroup unit in 2009, according to BrokerCheck.
Amaral’s BrokerCheck reports show three client complaints that sought a total of $929,000 in damages for excessive trading and breach of fiduciary duty between 2010 and 2014. Morgan Stanley settled all three for a total of $382,000, according to BrokerCheck.