Morgan Stanley’s Stewart Malloy Charged With Failing To Testify to FINRA
Stewart Clinton Malloy (CRD: 1029931) is a former registered representative of Morgan Stanley located in Riverhead, New York. Financial Industry Regulatory Authority (“FINRA”) Department of Enforcement filed a Complaint against Malloy on August 24, 2018 (Disciplinary Proceeding #2016051299201) alleging that he violated FINRA Rules 8210 and 2010 by twice failing to testify in an investigation into his possible sales practice violations including unauthorized trading and unsuitability.
FINRA Department of Enforcement first noted in the Complaint that on August 6, 2015, Malloy was fined $5,000.00 and issued a thirty day suspension from associating with any FINRA member according to Letter of Acceptance, Waiver and Consent #2013035953801. The findings stated that Malloy exercised discretionary power in two Morgan Stanley customer accounts without those customers providing Malloy with written authorization. The findings also stated that Malloy misstated his activities on Morgan Stanley’s compliance questionnaire by claiming that he had not exercised discretion in customer accounts.
The Complaint alleged that Malloy’s registration was terminated by Morgan Stanley on October 2, 2015 after the firm grew concerned about Malloy as a result of his execution of the Letter of Acceptance, Waiver and Consent. Between October 31, 2015 and September 12, 2016, Morgan Stanley apparently filed two amendments to Form U5, revealing to FINRA that customers had complained about Malloy’s sales practices. Malloy was alleged by customers to have executed unsuitable and unauthorized trades.
FINRA spoke with Malloy regarding his ability to testify and he expressed his willingness to cooperate with FINRA, indicating that he would be available to testify in May 2018. FINRA scheduled Malloy’s testimony however, he never showed up.
The Complaint stated that in the days preceding his scheduled testimony, FINRA rescheduled Malloy’s testimony. Malloy failed to appear for the second time and FINRA Department of Enforcement now seeks sanctions to be imposed against him for violations of FINRA Rules 8210 and 2010.
Malloy has disclosed that he has previously been subject of eight customer-initiated, investment-related complaints or arbitrations collectively alleging discretionary trading, unsuitability, unauthorized trading, breach of fiduciary duty, and failure to follow customer instructions. Those customers’ disputes, which include the following, pertain to Malloy’s activities when he was registered with Merrill Lynch and Morgan Stanley:
January 4, 2013 Complaint: The Morgan Stanley customer alleged unauthorized trading of stock in the customer’s account. The customer’s complaint was settled for $28,000.00 in damages on February 12, 2013.
October 26, 2015 Complaint: A customer of Morgan Stanley alleged that unsuitable energy stocks were placed in the customer’s account. Morgan Stanley resolved the customer’s complaint on February 12, 2016 for $60,000.00 in damages.
August 29, 2016 Arbitration #16-02490: A Morgan Stanley customer alleged unsuitable equities and options trades were executed in the customer’s account. The customer agreed to resolve the matter on October 4, 2017 for $300,000.00 in damages.
Gregory Tendrich, P.A. is experienced at representing investors who have suffered losses due to their financial advisor or broker engaging in trading without written discretion and unsuitable and unauthorized transactions. If you have incurred losses by investing with Stewart Clinton Malloy or another broker, call Gregory Tendrich, P.A. at (561) 417-8777 for a consultation regarding your legal rights and remedies.