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Morgan Stanley Fined $4.5M in Fraud and Negligence Case

Morgan Stanley Fined $4.5M in Fraud and Negligence Case

The Financial Industry Regulatory Authority (FINRA) fined Morgan Stanley & Co. $4.5 million in an arbitration dispute involving Morgan Stanley and Banco Nacional de Mexico SA, the Mexican bank known as Banamex, a subsidiary of Citigroup.

The $4.5 million award represents 87 percent of the $5.2 million in compensatory damages Banamex had requested. The damages were compensatory and not punitive.

In 2012, Banamex’s fiduciary division sued Morgan Stanley for fraud, negligence and other allegations. The crux of the case was whether Morgan Stanley agreed to pledge the assets of a wealthy family’s trust against a third party debtor.

A spokeswoman for Morgan Stanley claims that the patriarch of the family pledged the trust accounts as collateral for loans that benefited the family, and those accounts were treated that way for the two-year period at issue.

However, the attorney for Banamex alleges that the trustee did not agree to repay any third party loans, and that Morgan Stanley took actions that made it appear that the pledge to repay the loans was recorded.

According to the award, FINRA’s three member arbitration panel found Morgan Stanley liable for negligence and negligent supervision.

The team of investment fraud lawyers at Starr Austen & Miller LLP handles cases involving securities arbitration  misrepresentation, overconcentration, broker fraud, negligence, broker churning, breach of trust, as well as investment advisor malpractice.

Source: Investment News