FINRA Investigates Morgan Stanley Broker For Unauthorized Trading
Stewart Clinton Malloy of Riverhead New York a stockbroker formerly registered with Morgan Stanley is the subject of a Financial Industry Regulatory Authority (FINRA) Wells Notice in which FINRA has made a preliminary determination for Malloy to face disciplinary action for failing to testify in a FINRA investigation in possible violation of FINRA Rules 2010 and 8210. Case No. 20160512992 (June 18, 2018).
This is the second time that Malloy has been on FINRA’s radar for allegations of misconduct. Particularly, Malloy has been fined $5,000.00 and suspended from associating with any FINRA member in any capacity based upon consenting to findings that while Malloy was associated with Morgan Stanley, he effected discretionary transactions in customers’ accounts without authorization having been granted to him. Letter of Acceptance, Waiver and Consent No. 2013035953801 (Aug. 6, 2015).
According to the AWC, between July of 2011 and August of 2012, fifty nine transactions had been effected by Malloy in the accounts belonging to two Morgan Stanley customers. Those customers reportedly never granted Malloy any authorization to effect the trades in their accounts. The AWC also revealed that the firm did not approve the accounts as discretionary.
The AWC further stated that Malloy was issued a compliance questionnaire by Morgan Stanley on February 21, 2012. Malloy evidently stated in his submission of the questionnaire that he had not been involved in any form of discretionary trading. FINRA concluded that Malloy’s statement was false based upon findings of his discretionary trading in the two customers’ investment accounts. As a result, FINRA found that Malloy’s conduct was violative of FINRA Rule 2010 and National Association of Securities Dealers (NASD) Conduct Rule 2510(b).
FINRA Public Disclosure also confirms that Malloy has been identified in eight customer initiated investment related disputes containing accusations of his violative conduct while employed with Morgan Stanley and Merrill Lynch, Pierce, Fenner & Smith Incorporated. Particularly, Malloy was named in a customer initiated investment related arbitration claim in which the customer was awarded $16,500.00 in damages based upon Malloy being found liable on the customer’s claims of discretionary trading and suitability.
Thereafter, Malloy was subject of a customer initiated investment related arbitration claim where the customer was awarded $8,520.00 in damages based on Merrill Lynch being found liable on the customer’s claims of unsuitable trading of equities in the customer’s individual retirement account and churning of the customer’s investment portfolio. NYSE Arbitration No. 003004.
On January 12, 2000, a customer filed an investment related complaint involving Malloy’s conduct in which the customer requested $15,225.00 in damages supported by allegations that Malloy executed a sale of the customer’s stock holdings without the customer providing consent. On May 25, 2004, another customer initiated investment related complaint concerning Malloy’s activities was settled to resolve accusations that fiduciary duties owed to the customer had been breached and the customer’s investment instructions were not followed concerning over-the-counter equities.
Moreover, on February 12, 2013, a customer initiated investment related complaint regarding Malloy’s conduct was resolved for $35,000.00 in damages based upon allegations that unauthorized stock trades were placed in the customer’s account. Then, on December 6, 2013, another customer filed an investment related complaint involving Malloy’s activities where the customer sought unspecified damages founded on accusations that that the customer had not provided any authorization of the equities purchases that had been executed in the customer’s account.
Furthermore, on February 12, 2016, a customer initiated investment related complaint concerning Malloy’s activities was settled for $60,000.00 in damages supported by allegations that it was not appropriate for the customer’s account to have been allocated in energy sector stock. Subsequently, a customer initiated investment related arbitration claim concerning Malloy’s conduct was resolved for $300,000.00 in damages based upon accusations that options and stock transactions were effected in the customer’s account that were not suitable for the customer. FINRA Arbitration No. 16-02490 (Oct. 4, 2017).
Malloy’s registration with Morgan Stanley has been terminated as of October 2, 2015.
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