Massachusetts Charges Morgan Stanley with Unethical Conduct

Massachusetts securities regulators have charged brokerage firm Morgan Stanley with running an unethical, high-pressure, sales contest. The purpose of the contest was for Morgan Stanley stockbrokers to encourage clients to borrow money against their brokerage accounts, using the securities in the clients’ accounts as collateral for the loans.

Of course, borrowing against your securities account places your securities, i.e., your savings, at risk. This type of recommendation can be unsuitable for many investors.

It has been reported that from January 2014 until April 2015, Morgan Stanley ran two different contests involving 30 brokers in Massachusetts and Rhode Island. Morgan Stanley stockbrokers could earn $1,000 for 10 loans, $3,000 for 20 loans and $5,000 for 30 loans. The contest generated $24 million in new loans, according to Massachusetts regulators.

Importantly, the contest was run despite the fact that Morgan Stanley’s internal rules prohibited such contests. Massachusetts Secretary of the Commonwealth William Galvin said that Morgan Stanley advisers violated their fiduciary duty to their clients by recommending the loans.

Have you lost money with Morgan Stanley investments due to unethical conduct?

While Morgan Stanley claims that the Massachusetts regulator’s charges are without merit, there is no disputing that borrowing money against your investment account increases risk of loss.

If your stockbroker recommended that you borrow money in your brokerage account and you lost money, you may have claims for unsuitable investment recommendations. Contact our stockbroker fraud lawyers for a free case evaluation.

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