morgan stanley options fine

Morgan Stanley to Pay $11.7 Million Over Unauthorized Options Trading Strategy

An arbitration panel has asked Morgan Stanley to pay nearly $12 million to Anthony Nowak. The claim against the wirehouse alleging breach of fiduciary duty and negligence had been filed by Nowak in August of 2021, as revealed in the award, and pertained to a covered call options strategy that was seeming unauthorized.

The arbitration award states that the deployment of the strategy resulted in the investor acquiring large positions in tech stocks such as Apple, Nvidia, Salesforce, Microsoft, Tesla Motors, and Apple.

UBS has faced similar lawsuits regarding its options trading program called Yield Enhancement Strategy.

Matthew Thibaut, a partner with Haselkorn & Thibaut, P.A., a law firm that has experience in handling investment loss recovery cases and representing investors, and a former defense lawyer who has represented UBS and Merrill Lynch, said “the potential claims against UBS and these other massive broker-dealer firms are nothing really new and these matters seem analogous to the structured product cases I used to defend, particularly following Lehman Brother’s bankruptcy in September 2015. There are eerily just too many similarities to ignore.”

Haselkorn & Thibaut, a national investor law firm, offers a free portfolio review and consultation for Morgan Stanley clients. Investors can call 1 888-628-5590 or visit to schedule a free consultation.

The decision of the Tampa, Fla.-based three-member panel, which took 21 hearings to be determined, awarded $11.5 million to Nowak as compensatory damages. In addition, Morgan Stanley was ordered to pay him $157,000 towards reimbursement of the costs incurred in the proceedings, leaving out the matter of payment of Nowak’s attorney bills “to a court of competent jurisdiction to determine whether to award attorneys’ fees.”

The panel denied Nowak’s request for sanctions against Morgan Stanley. The panel also denied Morgan Stanley’s request to remove the complaint from advisor Craig Thistlethwaite’s regulatory record.

Covered Calls

A call option on shares owned by an investor is sold in a covered call. The buyer of the option gets the right to buy the shares in the contract at the predetermined price within the defined period of time.

A covered call option can result in profit for an investor who does not expect the price of the stock to rise during the defined period. However, if the buyer of the option exercises the option and buys the shares, the investor writing the option contract could miss out on long-term gains in the price of that stock.

The Complaint

Morgan Stanley had been accused by Nowak of failing to retain text messages he exchanged with his financial advisor, not named as a defendant in the case, during the arbitration proceedings. Morgan Stanley responded by saying that they did not have a need to do that since the messages referred by Nowak were exchanged on devices not issued by the firm. Further, they also claimed that the advisor was a friend of Nowak and that the duo frequently discussed matters such as investments.

Concluding Remarks

A request for comments was not responded to by Alfred Villoch of the law firm Savage Villoch, Nowak’s attorney.

Morgan Stanley issued a statement stating that it “strongly disagrees with the award and is evaluating its options.” The company spokeswoman did not comment on the aspect pertaining to the removal of the case from advisor Thistlethwaite’s regulatory record.

A request for comment was not responded to by the advisor himself as, well.

Investor Tips on Broker Fraud

Whether you’re considering hiring a financial advisor or you’ve already started working with one, you’ll want to ensure you’re dealing with someone you can trust. There are several ways to avoid financial advisor fraud, including avoiding scams and putting your own interests ahead of your investment adviser’s.

Whether you are an existing or prospective investor, you should be aware of the laws and rights that apply to misrepresentation or omission of key facts in financial advisor fraud. This information will assist you in determining whether you are at risk of investment losses. It will also help you understand what to do if you are the subject of an investigation. If you believe you have a claim against your financial advisor, you should consult with an experienced securities fraud attorney.

You should also keep an eye on media reports about cases of investment fraud. You may be entitled to compensation if you discover significant omissions that your financial advisor failed to disclose. You can also sue your broker if he or she fails to perform adequate due diligence.

Fraud and negligence are two examples of misrepresentation. A fiduciary duty obligates an investment advisor to protect his or her clients from loss. This duty requires the advisor to provide the client with all relevant information. An unscrupulous financial advisor will frequently withhold information in order to increase commissions.

Putting the interests of their customers ahead of their own

Putting your customers’ needs ahead of your own is a good thing, albeit a difficult one. The recent flurry of proposals from the Feds and other bureaucrats demonstrates that we are not alone in this regard. It is also common knowledge that Wall Street and other financial institutions have a dark side. Several studies have been conducted in recent years that have revealed that a number of financial advisors and other aficionados are not as up-to-date as they should be. The most recent blunders, largely the result of a lack of transparency and oversight, have been particularly disastrous.

How to Avoid Scams

Whether you’re a novice or an experienced investor, you should understand how to avoid financial advisor fraud scams. A dishonest advisor can take advantage of your weaknesses and steal your money.

When you receive unsolicited sales calls or emails, you should be cautious. The only way to avoid these scams is never to provide personal information to strangers.

If you receive a call from someone you don’t know, hang up right away. To help protect yourself from these types of unsolicited phone calls, you can also use the Federal Trade Commission’s National Do Not Call Registry.

Bad actors frequently impersonate institutions or people you know. They use deception to persuade you to give them your personal information. They might even pose as a government agency or your bank.

Scammers frequently use social media to learn more about their victims. They then use that information to send you a bogus link or attachment that will infect your computer with malware.

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