Morgan Stanley: Complaints, Regulatory Actions

Morgan Stanley Broker Review – SEC & FINRA Sanctions | The White Law Group

The White Law Group reviews the regulatory history, broker misconduct, and customer complaints involving Morgan Stanley.

Morgan Stanley Background

Morgan Stanley (CRD#: 149777 / SEC#: 801-70103, 8-68191), based in Purchase, New York, is a dual-registered broker-dealer and investment advisory firm. It operates under various names including:

• Smith Barney

• Graystone Consulting

• Private Portfolio Group

• Morgan Stanley Wealth Management

• Morgan Stanley Smith Barney LLC

• Consulting Group

According to FINRA’s BrokerCheck, Morgan Stanley has 180 total disclosures on its record, including 66 regulatory events and 113 arbitration claims, reflecting numerous supervisory failures and enforcement actions.

A broker-dealer’s CRD record is maintained by FINRA and contains regulatory filings, arbitration awards, and disciplinary actions involving both the firm and its registered representatives.

July 23, 2025 – Morgan Stanley Faces FINRA Probe Over Client Vetting Practices

Morgan Stanley is currently under investigation by the Financial Industry Regulatory Authority (FINRA) for its client vetting practices and anti-money laundering (AML) controls. The regulatory probe reportedly covers activities between October 2021 and September 2024 and focuses on how the firm assessed risk rankings for both U.S. and international clients across its wealth management and trading divisions.

According to a recent report by the Wall Street Journal, FINRA has submitted at least six data requests to Morgan Stanley, including one in the past few weeks, as part of the investigation. The firm has also faced federal scrutiny for AML compliance and may be subject to fines. Morgan Stanley says it has invested significantly in recent years to enhance its AML and client-screening programs.

SEC Charges Morgan Stanley with Multi-Year Fraud

January 12, 2024
The SEC charged Morgan Stanley and former executive Pawan Passi with a multi-year block trading fraud. The firm allegedly leaked confidential trade data to favored institutional clients to front-run large stock transactions.

Morgan Stanley paid over $249 million to settle the case, including:

• $138 million in disgorgement

• $28 million in prejudgment interest

• $83 million civil penalty

Unsuitable Investment Recommendations

November 23, 2022
FINRA fined Morgan Stanley $697,897, including restitution to harmed clients, for allowing nine brokers to make unsuitable recommendations of high-risk investments (e.g., MLPs and early-stage pharma) to moderate and conservative investors.

Morgan Stanley Fails to Protect Customer Data

September 20, 2022
The SEC fined Morgan Stanley $35 million for failing to properly dispose of devices containing sensitive data from 15 million customers. The firm reportedly hired an unqualified moving company, which sold the devices on internet auction sites.

SEC & FINRA Sanctions for Supervisory Failures

December 30, 2020
Morgan Stanley paid $1.46 million to settle charges related to 529 Plan overcharges. FINRA found the firm lacked adequate systems to monitor share class recommendations for college savings plans.

Morgan Stanley Supervision Failures – Account Churning

August 12, 2020
Morgan Stanley was fined $950,000 for failing to supervise a broker who churned client accounts, causing over $900,000 in losses to 10 investors through excessive trading of corporate bonds and preferred stocks.

Misreporting Securities Trading Data

July 9, 2020
Morgan Stanley paid $875,000 to settle charges that it submitted inaccurate blue sheet trading data on 156,678 options transactions due to human error and coding issues from 2014 to 2017.

Morgan Stanley Broker Embezzlement & Supervision Failures

July 13, 2018
Morgan Stanley failed to detect $7 million in unauthorized withdrawals by advisor Barry F. Connell, resulting in a $3.6 million fine and SEC censure. Connell was later arrested and charged with 15 counts of fraud and embezzlement.

Morgan Stanley Customer Complaints & Broker Misconduct

Jesus Rodriguez – $3.4 Million Fraud

January 24, 2024 – The SEC charged former Morgan Stanley advisor Jesus Rodriguez with stealing more than $3.475 million from clients through unauthorized transactions and fraudulent activity.

Ponzi Scheme – Shawn Good

April 19, 2022 – Morgan Stanley advisor Shawn Good allegedly defrauded five clients in a Ponzi scheme involving fake investments in tax-free bonds and land deals. He used funds for luxury purchases and was barred by FINRA.

NBA Players Sue Morgan Stanley for Fraud

February 11, 2022 – Ex-broker Darryl Cohen was barred by FINRA and accused of misappropriating funds from NBA players Chandler Parsons and Courtney Lee, who are seeking $5 million in damages.

Excessive Trading – Michael Paesano

July 14, 2021 – Former broker Michael Paesano has 24 customer complaints, many related to excessive trading. He was discharged in 2017 for violating firm policies.

Boston Brokers Plead Guilty

January 31, 2018 – Ex-Morgan Stanley brokers James Polese and Cornelius Peterson pled guilty to stealing $500,000from client accounts to fund personal projects and expenses.

Morgan Stanley to Pay $15 Million for Advisor Misconduct

2024 Update
Morgan Stanley agreed to pay a $15 million fine to settle SEC allegations that it failed to prevent four advisors—Michael Carter, Gary Chang, Douglas McKelvey, and Jesus Rodriguez—from misappropriating nearly $10 million from client accounts via unauthorized ACH and wire transfers.

Class Action vs. FINRA Arbitration

Which is better for investors?

Most Morgan Stanley clients must file FINRA arbitration claims due to mandatory arbitration clauses in their account agreements.

Securities Attorneys for Morgan Stanley Investor Claims

The White Law Group is a national securities fraud and FINRA arbitration law firm with offices in Chicago and Seattle. Our attorneys have recovered millions for investors in claims involving:

• Broker misrepresentation

• Unsuitable investments

• Unauthorized trading

• Excessive commissions (churning)

• Ponzi schemes and fraud

We have handled more than 700 FINRA arbitration cases in all 50 states.

If you invested with Morgan Stanley and believe you’ve suffered losses due to misconduct, call us at 888-637-5510 for a free consultation.

Visit: www.whitesecuritieslaw.com

FAQs

Q: What are common complaints against Morgan Stanley?
A: Common complaints include unauthorized trading, unsuitable investment recommendations, excessive fees, and lack of supervision leading to fraud.

Q: Can I sue Morgan Stanley for investment losses?
A: Most investors must pursue claims through FINRA arbitration, not traditional lawsuits, due to arbitration clauses in account agreements.

Q: What is Morgan Stanley’s CRD number?
A: Morgan Stanley’s FINRA CRD number is 149777.

Q: Has Morgan Stanley been fined by the SEC or FINRA?
A: Yes. The firm has paid hundreds of millions in regulatory fines, including recent penalties of $249 million (SEC), $15 million (SEC), and $950,000 (FINRA) for various violations.

Q: How can I recover money lost due to broker misconduct?
A: Contact a securities attorney to review your case. You may be able to recover funds through a FINRA arbitration claim.