FINRA suspended a former Morgan Stanley rep, Laura Casey, for “willfully” violating the SEC's Regulation Best Interest, according to a settlement released today.
Over the course of 10 days in July 2022, Casey purchased numerous products for clients, including exchange traded funds, with upfront sales charges. According to FINRA, clients wouldn’t have had to pay these charges had Casey bought them via clients’ advisory accounts, but starting in March 2022 several of Casey’s Morgan Stanley advisory clients also opened brokerage accounts. Casey held the products for several days before selling them, levying additional sales charges on clients’ accounts. In some instances, Casey used the proceeds from these sales to make more purchases, compounding the sales charges.
“Casey did not have a reasonable basis to believe that placing these trades in the customers’ brokerage accounts was in the customers’ best interests in light of the intended short holding periods and the associated costs,” the FINRA settlement stated.
Clients paid about $37,750 in unnecessary sales charges, but Morgan Stanley found the errant charges and reversed them, meaning Casey didn’t get any commissions. According to FINRA, Casey committed about 46 trades in seven brokerage accounts without prior written authorization from the customers or Morgan Stanley.
According to FINRA records, Casey entered the industry in 1996, spending a year at Goldman Sachs before brief and periodic registrations at Bear Sterns and Citigroup. She joined Morgan Stanley in 2018.
Casey resigned from Morgan Stanley “while under internal review” in September 2022, according to the settlement. From August 2022 through September of the following year, Casey was registered with Capitol Securities Management. She was suspended for seven months and will pay $7,500 to settle the allegations without admitting or denying them.
Morgan Stanley declined to comment.
FINRA suspended its first rep for Reg BI-related violations in fall 2022 when it accused a former rep with Network 1 Financial Securities of recommending several “excessive” transactions (the rep paid a $5,000 fine).
In January, LPL Financial paid more than $6 million to settle FINRA charges that it failed to comply with Reg BI when recommending trades in certain business development companies. FINRA alleged a small Texas-based brokerage firm violated Reg BI mandates in April.
