Finra arbitrators ordered Morgan Stanley to pay a senior investor $1.8 million for weighting too much of her portfolio in a single stock — WisdomTree Investments Inc.
From August 2011 to July 2020, Karen Busch worked with Morgan Stanley broker Todd Wachsman in the firm’s Garden City, New York, office. During that time, Wachsman was a particular fan of WisdomTree, an exchange-traded funds provider. Wachsman, who is Busch’s nephew, was not named as a respondent in the arbitration claim.
The “vast majority” of Busch’s portfolio was allocated to WisdomTree, said her attorney, Matthew Plant, a partner at Lax & Neville. The average price of the stock was $5.25 in 2011. The average price hit $16.17 in 2015, but fell to $3.46 in 2020.
Busch, who is now in her late 70s, filed a Finra arbitration claim in January 2021 seeking $1.6 million in compensatory damages. She asserted fraud, breach of contract, unjust enrichment, violation of industry rules, suitability and failure to supervise, among other causes of action.
A unanimous panel of three Financial Industry Regulatory Inc. arbitrators held Morgan Stanley liable and awarded Busch $1.8 million in compensatory damages, according to the Monday award.
“We’re very happy with the award,” Plant said.
The arbitrators gave Busch more in damages than she sought because they considered the opportunity costs she had by having been tied up in an unsuitable stock over a number of years.
“She was out of the market in an otherwise good market cycle,” Plant said.
Morgan Stanley disagreed with the arbitrator’s decision.
“Morgan Stanley is disappointed with the award as the client was advised multiple times by the firm about the concentrated position at issue,” Susan Siering, a Morgan Stanley spokesperson, wrote in an email.
Wachsman continues to work at Morgan Stanley’s Garden City office, according to his BrokerCheck record. His only customer dispute is the one filed by his aunt. It will remain on his record because the Finra arbitrators denied his expungement request.
“When wrongdoing like this occurs, the public should know about it,” Plant said. “Expungement in these circumstances would not be appropriate.”
Integrated Partners is adding a mother-son tandem to its network in Missouri as Kestra onboards a father-son advisor duo from UBS.
Futures indicate stocks will build on Tuesday's rally.
Cost of living still tops concerns about negative impacts on personal finances
Financial advisors remain vital allies even as DIY investing grows
A trade deal would mean significant cut in tariffs but 'it wont be zero'.
RIAs face rising regulatory pressure in 2025. Forward-looking firms are responding with embedded technology, not more paperwork.
As inheritances are set to reshape client portfolios and next-gen heirs demand digital-first experiences, firms are retooling their wealth tech stacks and succession models in real time.
