In early June, FINRA filed a regulatory complaint against former Morgan Stanley broker Kim Dee Issacson. Issacson had worked in Morgan Stanley’s Salt Lake City branch from December 2008 until February 2014. The regulatory complaint is apparently related to a customer arbitration claim filed against Issacson by Keith Melton and seven related entities in 2014 (FINRA Case No. 14-00829). An award was issued in June 2016.
The award and the FINRA complaint reveal that over four years Issacson verbally misrepresented the account value of the various Melton-related accounts maintained at Morgan Stanley with Issacson as the broker. He made these misrepresentations to conceal the losses that were ongoing in the accounts and the fact that the accounts were not performing at a rate of 4 to 6% per year as Issacson had promised. The Boca Raton, FL arbitration panel noted in its award that Issacson testified at the hearing that he lied to Melton about the accounts’ value and knew that Melton was relying on his misrepresentations.
Additionally, Issacson engaged in 360 unauthorized transactions, including trades in a specific security that Melton told Issacson not to buy for his accounts. He also continued to purchase shares in a security and long-term bonds after being instructed by Melton to stop.
In February 2014 the client discovered that Issacson had been lying to him about the performance and value of his accounts. By then, Issacson had told the client that the accounts were worth $3.1 million more than they actually were. Issacson then attempted to settle the matter “away” from Morgan Stanley by proposing to pay Melton $100,000 per year. Alternatively, Issacson offered to use a line of credit Melton maintained with Morgan Stanley to “trade” the accounts until the $3.1 million deficit was covered. As part of this plan, Issacson would pay the interest on the line of credit.
Melton ultimately filed a FINRA arbitration claim on behalf of himself and the related accounts against Morgan Stanley, Issacson and three other Morgan Stanley employees, including the branch manager. The panel awarded the claimants $993,989 in damages, representing disgorgement of fees and commissions charged to the claimants, and $2,593,000 representing the difference between the actual value of the accounts and the misrepresented value Issacson had told Melton. The award was against Issacson and Morgan Stanley; one of the other individuals settled prior to the hearing and the claims were dismissed against the remaining two respondents.
Issacson voluntarily resigned from Morgan Stanley shortly after Melton complained in 2014. His FINRA BrokerCheck report indicates that he is currently working for Ameriprise Financial in Salt Lake City.
Issacson has been in the securities industry since 1978. He has worked in Utah since 2000 and was at UBS and Piper Jaffray prior to Morgan Stanley. He has three other reported customer complaints on his BrokerCheck report. One is pending (with allegations very similar to the Melton claim) and two that were denied.
Reports of this case say that Melton was 71 years old. However, he apparently was a very wealthy. One report said the combined value of the accounts was about $27 million. Neither the arbitration award nor the disclosure of the FINRA regulatory complaint make reference to the age of the client or his age being a factor in the case.
Nicholas J. Guiliano has over twenty five years experience representing investors before the Financial Industry Regulatory Authority, the New York Stock Exchange and before the National Association of Securities Dealers, Office of Dispute Resolution. Over the last twenty years, he has represented more than a thousand investors from all across the United States and from several foreign countries, in claims against stockbroker and broker-dealers for fraud, breach of fiduciary duty, churning or excessive trading, the sale of unsuitable investments, the sale of defective investments, the sale of unregistered securities, and the failure to supervise. He is frequently quoted in the national media on securities and investment related issues, most recently on National Public Radio. He offers his services on purely a contingent fee basis, and is also a member of Public Investors Arbitration Bar Association. For more information, contact us at (877) SEC-ATTY.
For more information concerning common claims against stockbrokers and investment professionals, please visit us at securitiesarbitrations.com
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