FINRA Arbitration Panel Orders Morgan Stanley to Pay $519K for Client Losses

Timothy J. Prouty

A couple from New Mexico claiming that a Morgan Stanley financial advisor, Timothy J. Prouty, persuaded them to buy complex financial instruments were awarded $519,089, plus interest by a FINRA Arbitration Panel.

In 2016, a couple alleged that Morgan Stanley’s broker engaged in unauthorized trading, among other things, resulting in losses of within their eight accounts. The couple’s main allegation focused on suitability violations.

Suitability violations occur when brokers fail to conduct reasonable due diligence and understand the potential risks and rewards of a recommended strategy. A broker is required to analyze a customer specific factors before making a determination that a particular investment is suitable to a customer. In other words, an investment recommendation must be consistent with client’s age, income, investment objectives and/or investment risk tolerance.

In this instance, the couple alleged that Timothy J. Prouty, their broker, persuaded them to purchase junk bonds, options and ETFs that were invested in derivates and futures.
A FINRA panel ruled in favor of the couple. The award found Morgan Stanley liable in the amount of $519,089, plus interest at the rate of 8.75% per annum from April 5, 2019 until paid in full. The broker’s request for expungement of his CRD record was denied.

If you or someone you know lost money due to suitability violations with Morgan Stanley and/or Timothy J. Prouty you may be entitled to recover your investment losses through FINRA arbitration. CMD accepts cases on a contingency fee basis, which means we only get paid if you get paid. Your time to file a claim may be limited, so contact us today at (212) 658-0458 or for a free and confidential case evaluation.