Secretary of State Dilbert Hosemann fined Morgan Stanley $4.2 million for improper trading by one of its financial advisers and subsequent losses suffered by clients last week. The New York Times picked up the ball and ran with it as it showed a more complete picture of what took place at the local office of Morgan Stanley. The newspaper's quiz revealed an office that was not well-monitored by the company and a "genius" broker who was double dealing with his clients. The New York Times reported:
A troubling call came in to Morgan Stanley’s internal hotline in May 2010.
One of the company’s top financial advisers in Mississippi, Steve Wyatt, was struggling with medications and was “not sleeping, coming in 3 and 4 a.m.,” his assistant said on the call, according to notes taken by the person who answered the phone. Mr. Wyatt, a broker, was also trading client money “erratically,” the assistant said.
Morgan Stanley is one of the top banks on Wall Street, operating one of the most sophisticated financial advisory businesses in the world. But when the call came in, there was little effort to help fix the problems, Mr. Wyatt’s colleagues — and Mr. Wyatt himself — testified in arbitration.
This was not the only time Morgan Stanley did not heed warnings about Mr. Wyatt, who managed tens of millions of dollars of customer money, according to a settlement this week and documents from arbitration cases against him and the company.
During Mr. Wyatt’s five years at the company, supervisors and compliance officers noted his problematic behavior and business patterns many times and failed to step in, documents show. Lawyers for his former clients claim that they lost about half their money, or around $50 million...
Mr. Wyatt, who oversaw more than $100 million in client money, was fired in 2012, more than two years after that phone call and after more concerns were raised....
This week, the Mississippi secretary of state said in a settlement with Morgan Stanley that it had “failed to reasonably supervise” Mr. Wyatt. “Clearly, they had warning signs — they had indications of personal issues,” Delbert Hosemann, the Mississippi secretary of state, said of Morgan Stanley. “All of those were either dealt with in a cursory manner or not dealt with at all.”
The settlement barred Mr. Wyatt and his immediate supervisor from the securities industry for life. Morgan Stanley was also instructed to create a $4.2 million fund to reimburse clients, a small part of what customers claim they lost with Mr. Wyatt.
Morgan Stanley did not admit or deny the accusations in the state settlement.
The company is fighting dozens of Mr. Wyatt’s former clients in arbitration. It has said in legal documents that the clients were “negligent” for not following Mr. Wyatt more closely. In the three arbitration cases that have been decided so far, Morgan Stanley has had to pay about $3 million....
The state settlement provides few details about the behavior that got Mr. Wyatt and Morgan Stanley into trouble. But closed testimony and thousands of pages of documents from the arbitration cases reviewed by The New York Times shed light on how the matter played out at the company.
At one point, Mr. Wyatt’s behavior raised enough concern that Morgan Stanley supervisors stopped him from trading in his personal accounts. At the same time, the company allowed him to continue trading money he managed for clients.
One of his colleagues in Mississippi said in closed arbitration testimony that she and others in the office were suffering from a “basic shock that nothing was happening to help Steve, help the clients, help the firm, help the office with what was going on,” according to a transcript.
“The broker is a problem in this case,” said Joseph Peiffer, a lawyer representing some of Mr. Wyatt’s clients. “But the real problem is that he was allowed to do what he did by Morgan Stanley.”...
In 2011, Morgan Stanley began an investigation of Mr. Wyatt’s behavior. That ended with a reprimand for buying stocks on behalf of customers without checking with them first, the Mississippi settlement said.
Mr. Wyatt was fired in June 2012 when a lawyer representing one of his clients presented Morgan Stanley with evidence that he had been using a personal email address to push clients to buy investments that he held in his own private accounts....
The settlement this week said that Morgan Stanley did little to check whether Mr. Wyatt’s trading strategies were consistent with his clients’ needs, or to verify the information about them that he put in the company’s database..... Rest of article.
31 comments:
Wow!!!!!
So, was he simply one among many crooks in the business world or was he mentally deranged or afflicted by improperly used meds or self medication or a combination of all the above?
The article and parenthetical remarks seem to hint obtusely at the possibility of all four. And, no, this is not libelous. Questions that raise possibilities do not constitute libel.
So far I don't see any evidence of criminal wrongdoing, so it's incorrect to label him a "crook." No law against trading away your client's money, as long as you're not trying to hide anything. Sounds like this guy was completely open with his trades, but the company didn't care. Civil, not criminal, penalties perhaps may apply.
Wonder what political office Mr. Wyatt now holds?
@PittPanther:
Mr. Wyatt was fired in June 2012 when a lawyer representing one of his clients presented Morgan Stanley with evidence that he had been using a personal email address to push clients to buy investments that he held in his own private accounts
Still see no evidence of criminal wrongdoing? Where I come from, we call this fraud.
Trading away is a FINRA violation and a violation of any broker dealer company policy. Nice try, though.
Financial Advisors normally don't steal directly (although with the rapidly aging boomers and parents having so much accumulated wealth it is happening more and more).What Wyatt, Brister, and Zimmerman was violate all the civil law of the S.E.C., FINRA, and states to get commissions and fees for Morgan Stanley and themselves. In a lot of instances this caused greater losses than pure theft - the broker invests $100,000 of client's funds in crap to get a $2,000 commission (Morgan Stanley gets 60%; Zimmerman gets 40%). The client is at risk of losing much or all of the $100,000 principal so the firm and broker can split just $2,000. I would rather just negotiate a deal up front where I pay them $2,000 not to do this to me - much cheaper.
Wyatt has a kid at Prep and a Chi O daughter at Ole Miss. Seems he is not suffering from lack of money too much.
Mississippi securities law is only administrative. No criminal prosecution possible. However, in Alabama, violations CAN get you a criminal conviction, as Alabama has criminal authority.
Delbert's office couldn't be trusted with criminal authority, as he does not like anyone with actual securities knowledge to "tell" him anything.
What is Wyatt and Zimmerman doing now to make a living for their families ? Just curious !!!!
Look at the top two people at Morgan Stanley Ridgeland,MS - Mike and Melanie Dowell, Managing Director and Senior Vice-President. They hold an investment advisory contract with MPACT to the tune of $240,000.00. They are also contributors to Treasurer Lynn Fitch. Pay to play seems to sum it up!
File a complaint about them if you are worried. All political contributions are required to be disclosed to their broker dealer and are not to have any conflict of interest.
Dowells are in the old Smith Barney office on I-55 Jackson. All the Brister stuff went on in the Ridgeland office (fancy office at Renaissance). You are right in that they are one of several brokers who get small %s of fees on the large amount of PERS and Mpact assets. I don't think they do anything for the retirees or kids except contribute to politicians. A great story to delve into.
What about if they helped organize a fundraiser for Fitch?
Pump and Dump: You're correct, it sure seem like fraud and I did see that statement. But what concerns me is that it's been four years, and no indictment, no charges filed. Someone apparently doesn't believe they can make a criminal case stick.
We all know what Hosemann's agenda is, and it's not to protect MS taxpayers! He demonstrated that to us at the Press Confrence when he preened around implying what a great job he had done by getting $ 4.7 million back that clients had lost in their Morgan Stanley accounts. What he didn't talk about was the 80% of their money he left on the table that the clients did NOT get back!! SOS office does not have criminal authority, but they do have the power to do a lot more than they did! They could have recommended the AG office further
investigate this company, but they did not! Furthermore, SOS has the authority to revoke the Business License of MS in the state! There are ways to make this right and SOS did not use them!!!
Hoseman certainly has the authority to make Morgan Stanley pay back every dime lost in this cluster. He could have closed the office if he wanted to. This would cause MS immense problems in every other jurisdiction. He simply cost his constituents tens of million dollars MS lost by unethical/illegal behavior. Why on earth would someone sell his own people out for a New York company like Morgan Stanley that Hoseman himself proved they were wrong and liable? That is crazy and very, very wrong.He grossly dishonored his oath of office. Why? Why?
Again, I'll ask---what do Wyatt and Zimmerman do now to take care of their families ? Are they still in the investment business ?
The former Morgan Stanley advisor and broker's full name is Steven Mark Wyatt.
This is the name that appears on the FINRA Disciplinary Action.
https://www.finra.org/sites/default/files/publication_file/september%202014%20disciplinary%20action.pdf SEE PAGE 27.
Participating in a private stock placement using the name of his wife? A real swinging dick would probably a mulligan for a simple compliance oversight like that.
Who cares what Wyatt and Zimmerman are doing to support their families? Maybe they are getting by on the bonus of over one million dollars each they made when they went to work for Morgan Stanley!!!
The money managers that invest MPACT's money gets their fees that are netted out - the public has no way of finding out how much money is being made on the MPACT money. Under Marshall Bennett, the money managers were issued a state warrant or check. Their was a paper trail. Under Fitch, you do not know - not DFA, not the State Auditor, not the MPACT contract owners! Their needs to be some transparency of of the MPACT program.
Neither one EVER told us clients they got $3,400,000 for moving from Smith Barney to Morgan Stanley in Dec 2007. Just told us Morgan Stanley was "better". We were stupid. They are sleazy
Is Zimmerman not employed there anymore?
Right, nobody was in office between Bennett and Fitch.
All of the state institutions should be checked on the fees they are paying these brokers. JSU use to invest their cash into treasuries at 10 times the normal institutional rate. 1% to 2% fees on trades in the tens of millions when the going rate was .1% for this size trade on short term investments. The only people paying the fees that they were was the smallest of investors. B Bishop stole millions in fees that should have been used for education. Pay to play at its finest. This was going on 10 years ago not sure if they have wised up yet?
I guess it helps that Wyatt's maw n law is loaded from selling her family land to Nissan.
It would help me - and most any other son in law. But what's that got to do with this story?
Heps to keep comfortable in times of stress?
For all the folks that have been enamored by Gilbert's self-serving actions, ads, releases, etc over the past several years, here is another example of his total ineptness clothed in a press release making him seem like his s**t doesn't stink.
This division, along with all the others, is now staffed only with employees that won't question Hosemann; rather stands back and follows his incompetent lead.
Amen, 8:03 PM. The "settlement" of 4 million + is a drop in the bucket for the investors. Eggbert does none of the work, but won't let those under him do their jobs, either. Fred Brister, Steve Wyatt and Zimmerman should have been stripped of all licensing and the branch shut down. But that wouldn't go over well at the next social gathering with his buddy.
Dilbert has run off everyone that gave a damn and tried to actually do their jobs and help the public.
Wow, how has this been kept so quiet? I know a couple of the families, and this is the first I've heard of it. So sad to see men who will sell their souls and betray people that trust them.
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