FINRA Lawyer Blog
It has been reported that Morgan Stanley conducted a “nationwide probe” of abuses associated with its Former Advisor Program, a sun-setting plan that allows retired FAs to receive a split of fees and commissions paid by former clients. Further to this reporting, we conducted a survey of FINRA AWCs issued in the last 12 months in which FINRA claims an FA falsely used his individual rep code on customer trades in circumvention of the appropriate joint rep code, which would have yielded lesser compensation to the FA. The results of this survey were interesting. First, in virtually all cases, the FA worked for Morgan Stanley. That is interesting. It seems doubtful that people predisposed to rig the comp system work only for Morgan Stanley. Second, substantial disparities exist with regard to the sanction imposed by FINRA. Although the conduct is similar in all cases, FINRA’s sanction has ranged from a wrist-slap (10-business day suspension) to potentially career-ending (six-month suspension).
The table below illustrates the point (with hyperlinks to the AWCs):
| Case No. | FA | Employing Broker-Dealer | Sanction |
| 2021071531701 | Robert Barberis | Morgan Stanley | · One-month suspension
· $2,500 fine |
| 2021069218401 | Michael Witt | Morgan Stanley | · One-month suspension
· $5,000 fine |
| 2021071562601 | Jeffrey Martin | Morgan Stanley | · 15-business day suspension
· $2,500 fine |
| 2018058614301 | Richard Brendza | Morgan Stanley | · Six-month suspension
· $5,000 fine |
| 2020068897201 | Steven Romjue | Morgan Stanley | · Six-month suspension
· $5,000 fine |
| 2021071847701 | William Beasley | Morgan Stanley | · One-month suspension
· $2,500 fine |
| 2021072169601 | Michael Campopiano | Morgan Stanley | · One-month suspension
· $2,500 fine |
| 2020068936501 | Jazmin Carpenter | Morgan Stanley | · 10-business day suspension
· $2,500 fine |
| 2019061720801 | Jason Stannard | Morgan Stanley | · 10-business day suspension
· $2,500 fine |
| 2021071276801 | Thomas Foster | Morgan Stanley | · One-month suspension
· $2,500 fine |
| 2021070570201 | Michael Dmytryshyn | Morgan Stanley | · 10-business day suspension
· $2,500 fine |
| 2020068810301 | John Miller | Morgan Stanley | · 15-business day suspension
· $2,500 fine |
| 2019063245601 | Robert Norris | Cambridge Investment Research | · Two-month suspension
· $5,000 fine |
This trend is troubling. According to a study by J.D. Power, the average age of a financial advisor is 57 years old and approximately one-fifth are 65 or older. It was estimated by Cerulli Associates that 37% of financial advisors (collectively controlling 40% of total industry assets) will retire within the next 10 years.
All of the major broker-dealers offer sunset plans for retiring FAs. Merrill Lynch offers the “Client Transition Program.” UBS offers the “Aspiring Legacy Financial Advisor Core Program.” Morgan Stanley offers the “Former Advisor Program.” Wells Fargo offers the “Summit Program.” Given the age of the workforce, and the proliferation of sunset plans, I’m wondering this: who is protecting the retiring or retired FA? Is FINRA proactively protecting against abuses by the inheriting FA or are they simply waiting for Form U5s to drop? Have firms other than Morgan Stanley audited their sunset plans to ensure that production credits are properly allocated to the retired FA?
The cynic in me believes nothing is being done to protect the interests of participants in the various sunset plans.
Herskovits PLLC represents financial advisors nationwide. Feel free to call us at (212) 897-5410 to discuss your case.
