Finra arbitrators ordered Morgan Stanley and a former financial adviser at the firm to pay $160,000 each in damages to a Mexican farmer for allegedly making inappropriate recommendations about risky investments.
Carlos Ramon Tapia Sanchez, a farmer in Hermosillo, Mexico, sold his operation in 2015. The next year, he invested the proceeds in junk bonds that didn't fit his risk profile that were pushed by his long-time broker, according to Sanchez's attorney, Burt Newsome.
Sanchez worked with Morgan Stanley registered representative Francisco Javier Valenzuela in the firm’s Tucson, Arizona, office. Sanchez, who is now 70, lost about $368,000 on the investments, Newsome said.
Sanchez filed an arbitration claim against Morgan Stanley on Oct. 21, 2020, and against Merrill Lynch on Feb. 10, 2021. Valenzuela left Merrill Lynch in 2015 to join Morgan Stanley. In his claim, Sanchez cited elder abuse, misrepresentation and failure to supervise, among other causes of actions.
A three-person Financial Industry Regulatory Authority Inc. arbitration panel found Valenzuela liable for misrepresentation, manipulation and fraud, according to a May 26 arbitration award. The arbitrators found Morgan Stanley liable for negligence and failure to supervise. Valenzuela and Morgan Stanley were each ordered to pay Sanchez $160,000 in compensatory damages.
They held Morgan Stanley and Valenzuela jointly and severally liable for $10,000 in attorneys’ fees, resulting in a $330,000 total award for Sanchez, who had sought $357,622 in compensatory damages and attorneys’ fees.
“We’re pleased and grateful for the result,” said Newsome, owner of an eponymous law firm in Birmingham, Alabama. “My client was treated horribly by Morgan Stanley. I’m glad he was able to get justice.”
A Morgan Stanley spokesperson declined to comment. Valenzuela left Morgan Stanley in 2018; Finra barred him from the industry the same year, according to his BrokerCheck profile.
Sanchez voluntarily dismissed all claims against Merrill Lynch on March 30, which obviated the need for the arbitration panel to make a ruling with respect to Merrill on Sanchez’s claims.
The approval of the pay proposal, which handsomely compensates its CEO and president, bolsters claims that big payouts are a must in the war to retain leadership.
Integrated Partners is adding a husband-wife 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
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.
