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FINRA arbitration award spotlights brokers' elder abuse

A spokesperson for a major investment company calls a recent arbitration award handed down by the Financial Industry Regulatory Authority in an investment fraud matter "inconsistent with substantial evidence" indicating that a client's accounts were managed profitably and pursuant to his wishes.

Not so, says an attorney for that client's widow, who remarked in the wake of FINRA's recent arbitration announcement that "unauthorized trading was rampant" and that Morgan Stanley money managers took advantage of the client's age and diminished mental capacity to defraud him.

The $34 million-plus in damages awarded to the widow would certainly seem to indicate that the FINRA arbitration panel agreed with the arguments presented by her legal team. The panel ruled that a broker, manager and Morgan Stanley itself were all jointly liable for engaging in a lengthy laundry list of investment improprieties.

Those centrally included account churning, breach of fiduciary duty, unjust enrichment, unauthorized trading (more than 12,000 times), negligent supervision and exploitation of vulnerable adults.

"They were trading individual bonds like pork bellies," remarked one case commentator.

The outcome would have been far worse had the arbitrators assessed punitive damages in the case, which they declined to do. The decedent's estate was seeking nearly $370 million in punitives in the matter.

Given that the case has garnered strong media attraction, a stated goal of the woman in filing a grievance seems to have borne fruit. That objective was to spotlight investment fraud targeting older people.

The client was diagnosed with dementia and passed away in 2012.

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