FINRA announced it had fined and suspended Constantinos Maniatis, a former broker with Morgan Stanely, for unauthorized discretionary trading in a client account. Brokers linked to Morgan Stanley exercised discretion over seven client accounts in 105 cases between May 4, 2018, and February 27, 2019, FINRA said in a letter of acceptance and consent. Morgan Stanley has stopped exercising its discretion over the accounts, the agency said.
Maniatis began his career in the financial services industry in 2001 at Merrill Lynch and joined Morgan Stanley in 2009, according to his broker check profile. Morgan Stanley fired Maniatis in May 2019 over allegations related to his diversion of revenue associated with a Rep code that traded non-discretionary accounts, the company added in a client complaint logs related to the matter, according to Brokercheck.
Earlier this month, Maniatis agreed to a 30-day suspension and will pay a $5,000 fine after admitting and denying Finra’s findings, Morgan Stanley said. According to his documents, he was not registered with the company before he was fired in May 2019.
Financial advisors sell investment products, such as mutual funds and stocks, to clients. Most financial advisors are good and provide value to their clients.
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At times, financial advisors recommend investments that are not appropriate for an investor’s specific situation. This type of fraud could potentially be devastating to the victim who could lose a significant amount of money in their retirement account or overall net worth.
According to the U.S. Securities Exchange Commission and the Financial Industry Regulatory Authority (FINRA) these types of fraudulent acts are defined as churning or excessive trading. Churning occurs when a broker recommends unnecessary trades that generate profits to the broker but do little or nothing to improve an investor’s performance on his portfolio. The worst type of churning occurs when the broker recommends these trades as part of an effort to push an investor into costly or unsuitable investments.
Investment fraud can occur in a number of ways. The most common method includes the misappropriation of funds or securities from a brokerage account. Another common method involves the misappropriation, unauthorized trading, and alteration of account records to hide losses and create fictitious gains for clients. These acts are commonly referred to as “insider trading.” Lastly, investment fraud may include the illegal sale or purchase of securities based on inside information that is not available to the general public.
Financial advisors take a fiduciary duty, which means they must always act in the best interests of their clients. They should not be selling investments or financial services to the person who would benefit from them, but rather to someone who may benefit from them.
Anyone having issues concerns about their financial advisor should contact an investment fraud lawyer and have their case reviewed. They can also check out a broker’s record by going to FINRA’s brokercheck website.