Written by The White Law Group• July 23, 2020• 1:50 pm• Blog, Current Investigations

Stephen Sloane Under Investigation for Unsuitable Trades

Stephen Sloane, Former Morgan Stanley Advisor, Under Investigation for Unsuitable Trades, featured by top securities fraud attorneys, The White Law Group

FINRA Investigates Stephen Sloane for Allegations of Unsuitable Short-Term Trading

According to public records on the Financial Industry Regulatory Authority’s website and various reports, financial advisor Stephen Sloane was named a respondent in a FINRA complaint alleging that he recommended an unsuitable investment strategy to retail customers.

During the period from January 2014 through May 2018, reports claim that FINRA has alleged that Sloane recommended a short-term trading strategy for the purchase and sale of U.S. Treasuries in the accounts of ten customers at Morgan Stanley and Westpark Capital, Inc. without reasonably considering the commissions he purportedly charged on the recommended transactions.

These reports indicate that FINRA’s complaint also alleges that Sloane recommended that the customers engage in active, short-term trading of U.S. Treasuries with 10 and 30-year maturities, without conducting reasonable diligence to understand the effect of the strategy’s costs on the customers’ potential returns.

Sloane allegedly did not have a reasonable basis to recommend the strategy, nor did he “do any research or seek any guidance about whether the trading strategy could be profitable at the costs the customers paid,” according to FINRA.

According to the complaint, Sloane also “made no attempt to calculate either the returns he expected to generate from active trading or whether those returns would break even with the cumulative costs of his trading strategy.”

According to FINRA, Sloane reportedly received approximately $220,000 in compensation from implementing his strategy for the customers, representing his share of the $510,025 in markups and markdowns he charged to execute the trades for the customers.

By contrast, after paying markups, markdowns, and other transactional service fees, the customers realized total trading losses, exclusive of interest, of $329,811, as a result of Sloane’s alleged investment strategy, according to FINRA and various reports.

After Sloane purportedly disregarded Morgan Stanley’s instructions to reduce his trading costs, the firm reportedly fired him for disregarding its directive. Sloane then purportedly moved to another member firm, where he “continued executing the same unsuitable strategy,” according to FINRA.

The complaint also alleges that Sloane charged excessive and unfair markups. Sloane purportedly recommended that some customers use the proceeds from sales of treasury securities to purchase treasury securities the following day. The markups reportedly resulted in those customers’ trades on those days occurring at prices not reasonably related to prevailing market prices.

According to his FINRA BrokerCheck profile, Sloane was registered with Morgan Stanley from 2009 until 2016 when he was reportedly discharged for the above allegations. Sloane “vehemently denies allegations by Morgan Stanley,” according to his broker report. He is currently affiliated with Westpark Capital in New York, NY. His profile indicates that 4 customer complaints have been filed against him during his career in the securities industry.

Filing a Complaint against your Brokerage Firm

The White Law Group is investigating potential securities claims involving financial advisor Stephen Sloane and the liability that his employers may have for failure to properly supervise him.

When brokers violate securities laws, such as making unsuitable investment recommendations or unauthorized trades, the brokerage firm they are working with may be liable for investment losses through FINRA Arbitration.

Brokerage firms that fail to monitor the business activities of their employees may be liable for investment losses due to negligent supervision for the misconduct of their employees.

The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Franklin, Tennessee.