Practice Management

Finra bars another wirehouse broker involved in expense report snafu

The ex-Morgan Stanley broker in 2016 resigned when questioned about a $273 expense.

The Financial Industry Regulatory Authority Inc. on Monday barred a former Morgan Stanley broker who failed to complete on-the-record testimony regarding his departure from the firm two years ago after it raised questions about his expense account and a charge of $273.

According to the Finra settlement, the broker, John Baldeck, worked at Morgan Stanley and a predecessor firm from 1994 to 2016. That’s when Morgan Stanley permitted Mr. Baldeck to resign after the firm found that he “requested and received reimbursement from the firm for expenses described as client meal expenses, when the meals were actually personal in nature,” according to the Finra settlement.

According to his BrokerCheck report, the amount in dispute on Mr. Baldeck’s expense report was $272.94. After he left Morgan Stanley, Mr. Baldeck went to work for KMS Financial Services, a subsidiary of Ladenburg Thalmann.

“It’s a shame that a broker with a spotless record with respect to his customers ends up out of the business because of expense report violations,” said Marc Dobin, Mr. Baldeck’s attorney.

As part of the settlement, Mr. Baldeck neither admitted to nor denied Finra’s findings.

In his statement on his BrokerCheck report, Mr. Baldeck pointed to confusion about being reimbursed due to a portion of the firm’s payout program, known as the “grid” in the brokerage industry.

“I was a participant in the Morgan Stanley Automated Flexible Grid, AFG program, which deducted amounts from my net payout for business expenses,” Mr. Baldeck wrote. “Morgan Stanley determined that I was reimbursed $272.94 from those funds to pay for meals with my daughters. I have reimbursed Morgan Stanley for that amount, although I believe the AFG funds to be my funds to use.”

What’s clear is that regulators like Finra and large firms like Morgan Stanley are closely watching brokers’ and advisers’ expense report submissions. This month, Finra barred a former Merrill Lynch broker for falsifying receipts to qualify for $4,910 in reimbursement for childcare expenses.