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Morgan Stanley and Wells Fargo Tackled for Big Loss in $7.7 million FINRA Arbitration
December 28, 2018
In today's featured FINRA Arbitration we got a number. A BIG number. It's a demand by public customers for $7.8 million in damages from Morgan Stanley Smith Barney and Wells Fargo Advisors. In today's FINRA Arbitration we also have some interesting Claimants. We got former New England Patriots, Philadelphia Eagles, and Atlanta Falcons cornerback Asante Samuels, who, for whatever it's worth, has a tattoo on his arm that says "Get Rich To This." We got former Madison Square Garden employee, James Groves, who in 2009 won half of a $336 million Mega Millions jackpot. Obviously, we're tossing around some big bucks here, and that makes for an all the more interesting lawsuit. Except, FINRA's a bit of a party pooper. The FINRA Arbitration Decision is more titillation than explanation, but since you can't always get what you want, we're gonna have to make due with what we have.
Case In Point
In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in July 2016, and as amended thereafter, public customer Claimants asserted breach of fiduciary duty; negligence and gross negligence; violations of FINRA Rules 2111, 3110 and 3120; and negligent supervision in connection with their investments in the South Beach Club and the 7020 Club. In the Matter of the FINRA Arbitration Between Gregory Alan Groves, Sr., James Groves, Asante Samuel, Pearl Brothers, LLC, Makin Moves 22, LLC, and Deepside, LLC, Claimants, vs. Morgan Stanley Smith Barney, LLC and Wells Fargo Advisors, LLC, Respondents (FINRA Arbitration 16-02052, December 26, 2018).
http://www.finra.org/sites/default/files/aao_documents/16-02052.pdf
Respondent Morgan Stanley and Respondent Wells Fargo Advisors generally denied the allegations and asserted various affirmative defenses.
The FINRA Arbitration Decision presents the following concerning the initial and ultimate relief requested by the parties:
In the Statement of Claim, Claimants requested: compensatory damages in the amount of $7,818,162.85; accrued interest; lost opportunity costs for investments; attorneys' fees associated with addressing and responding to the SEC's investigation of the Parthemer King Group, Respondent MSSB and Respondent WFA; costs; attorneys' fees as allowable under the law, including as authorized by Section 517.211, Florida Statutes; and such other and further relief that the Panel deemed just and appropriate.. . .At the close of the hearing, Claimants requested: compensatory damages in the amount of $3,851,139.00 for Claimant Asante Samuel ($2,656,292.00 in losses and $1,194,847.00 in pre-judgment interest per Florida Statute), and for Claimant Gregory Alan Groves $5,002,703.00 ($3,571,725.00 in losses and $1,430,978.00 in prejudgment interest per Florida Statute).
In April 2017, Claimants Gregory Alan Groves, Sr., James Groves and Pearl Brothers, LLC notified FINRA of their regarding their claims against Respondent WFA; and, thereafter, in November 2017, Claimants Asante Samuel, Making Moves 22, LLC, and Deepside, LLC dismissed with prejudice of their claims against Respondent WFA. Accordingly, the Panel made no determinations with respect to their claims against Respondent WFA.
Award
The FINRA Panel of Arbitrators denied Claimants Gregory Alan Groves, Sr., Pearl Brothers, LLC, Makin Moves 22, LLC, and Deepside, LLC's claims against Respondent Morgan Stanley Smith Barney.
The FINRA Panel of Arbitrators found Respondent Morgan Stanley Smith Barney liable for negligence, negligent supervision, and violation of FINRA Rules 3110 and 3120, and ordered the firm to reimburse the Claimants $750 in FINRA filing fees and to pay:
Claimant James Groves: $2,379,000.00 in compensatory damages, plus $953,000.00 interest,Claimant Asante Samuel: $863,700.00 in compensatory damages, plus $15,300.00 interest
Bill Singer's Comment
Sad isn't it how little we know about the underlying dispute and defenses or of any substantive aspect of this case. The Decision is as bare bones as possible, which prompted me to do some research into the Parthemer King Group. By way of spoiler alerts, the SEC imposed upon partners Aaron Parthemer and Sylvester King respective fines of $160,000 and $80,000.
In the Matter of Sylvester King, Jr. Respondent (SEC Order Making Findings and Imposing Sanctions, '34 Act Rel. No, 81472, Invest. Adv. Act. Rel. No. 4757, Invest. Co. Act Rel. No. 32795, Admin Proc. File No. 3-17839 / August 23, 2017)
https://www.sec.gov/litigation/admin/2017/34-81472.pdf:
https://www.sec.gov/litigation/admin/2017/34-81472.pdf:
1. King is 44 years old and resides in Miramar, Florida. From June 2009 to October 2011 and from October 2011 to the end of April 2015 King was a registered representative and investment adviser representative of Morgan Stanley Smith Barney ("MSSB") and Wells Fargo Advisors, LLC ("WFA"), respectively. During this time, MSSB and WFA were dually registered with the Commission as broker-dealers and investment advisers. From 2008 until approximately October 2014, King was a National Football League Players Association Registered Financial Advisor ("NFLPA Advisor"). On April 27, 2015, FINRA accepted King's Letter of Acceptance, Waiver, and Consent whereby King was suspended from association with any FINRA member in any and all capacities for a period of 18 months and assessed a $35,000 fine. On July 28, 2015, FINRA revoked King's registration for failure to pay fines and/or costs.
Beginning in 2009 and continuing into 2012, King participated in selling more than $5million of unregistered, illiquid securities to certain of his professional athlete brokerage customers and investment advisory clients in an internet branding company known as Global Village Concerns, Inc. ("GVC"). King was issued GVC stock options and warrants provided by GVC. King's conduct with respect to the sale of GVC securities occurred outside and independent of his employment with registered broker-dealers. King misrepresented and omitted material information about the GVC investments to his investment advisory clients, some of which was based on information provided to King by GVC. King presented this information to his advisory clients without conducting any due diligence to verify any of the information he provided to his advisory clients. King also used his personal communication devices and emails to communicate with hisbrokerage customers and others about firm business without causing copies of thosecommunications to be sent to or preserved on the broker-dealers' respective email servers or preserved in paper form.
In the Matter of Aaron R. Parthemer Respondent (SEC Order Making Findings and Imposing Sanctions, '34 Act Rel. No, 81471, Invest. Adv. Act. Rel. No. 4756, Invest. Co. Act Rel. No. 32794, Admin Proc. File No. 3-17838 / August 23, 2017)
https://www.sec.gov/litigation/admin/2017/34-81471.pdf:
https://www.sec.gov/litigation/admin/2017/34-81471.pdf:
1. Parthemer is 44 years old and resides in Fort Lauderdale, Florida. From June 2009to October 2011 and from October 2011 to the end of April 2015 Parthemer was a registered representative and investment adviser representative of Morgan Stanley Smith Barney ("MSSB") and Wells Fargo Advisors, LLC ("WFA"), respectively. During this time, MSSB and WFA were dually registered with the Commission as broker-dealers and investment advisers. From 2005 until December 2012, Parthemer was a National Football League Players Association Registered Financial Advisor ("NFLPA Advisor"). On April 22, 2015, FINRA accepted Parthemer's Letter of Acceptance, Waiver, and Consent whereby Parthemer was barred from association with anyFINRA member in any capacity.
The "Summary" portion of the Parthemer's SEC Order asserts that:
Also READ: 'Bada Bing' Broker Parthemer Fined $160,000, Former Parnter Barred (AdvisorHub / August 24, 2017) https://advisorhub.com/barred-bada-bing-broker-gives-morgan-stanley-more-headaches/Beginning in 2009 and continuing into 2012, King participated in selling more than $5 million of unregistered, illiquid securities to certain of his professional athlete brokerage customers and investment advisory clients in an internet branding company known as Global Village Concerns, Inc. ("GVC"). King was issued GVC stock options and warrants provided by GVC. King's conduct with respect to the sale of GVC securities occurred outside and independent of his employment with registered broker-dealers. King misrepresented and omitted material information about the GVC investments to his investment advisory clients, some of which was based on information provided to King by GVC. King presented this information to his advisory clients without conducting any due diligence to verify any of the information he provided to his advisory clients. King also used his personal communication devices and emails to communicate with his brokerage customers and others about firm business without causing copies of those communications to be sent to or preserved on the broker-dealers' respective email servers or preserved in paper form.