Ken Kavanagh (also known as Kenneth Joseph Kavanagh and as Kenneth Kavanaugh) of New York New York a stockbroker registered with Morgan Stanley has been fined $25,000.00 and suspended for eighteen months from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity supported by findings that Kavanagh engaged in undisclosed outside business activities in which he managed affairs of professional athletes in return for an estimated $5,000,000.00 in compensation. Letter of Acceptance Waiver and Consent No. 2018058564001 (Aug. 5, 2019).
According to the AWC, during the time Kavanagh was associated with Morgan Stanley, he was subject of the firm’s written supervisory procedures which called for the stockbroker to notify the firm and obtain the firm’s permission before engaging in any activities outside the scope of the stockbroker’s employment.
Kavanagh had been hired by forty-two athletes, most of whom held accounts with Morgan Stanley, to provide personal services for them. Since 2003, Kavanagh’s services included handling his athlete customers’ personal finances and insurance matters, and referring customers to third parties to provide tax and estate planning services for customers. Kavanagh established a New Jersey company, CEO-Sports, in 2017 to undertake these personal services. A Pennsylvania company, MGMT LLC, was also created by Kavanagh to facilitate those activities. FINRA stated that Kavanagh earned approximately $5,000,000.00 from customers through services he performed between 2012 and 2018.
The AWC stated that Morgan Stanley had not been notified by Kavanagh about his outside business activities which pertained to MGMT LLC and CEO-Sports. Kavanagh concealed these activities by placing other individuals on the companies’ accounts. The AWC stated that six compliance questionnaires were administered to Kavanagh between 2012 and 2017 by Morgan Stanley. Kavanagh falsely represented in those questionnaires that he did not partake in any activities outside his employment with the firm. FINRA found Kavanagh’s conduct violative of FINRA Rules 2010, 3270 and National Association of Securities Dealers (NASD) Rules 2110 and 3030.
FINRA Public Disclosure reveals that Kavanagh is referenced in a customer initiated investment related complaint on August 15, 2018 where the customer requested $186,000.00 in damages supported by allegations that during the time Kavanagh was associated with Morgan Stanley, unauthorized transactions were effected in the customer’s account; and the customer’s signature had been forged on documentation to effect transactions. The complaint was subsequently withdrawn by the customer.
Kavanagh was terminated by Morgan Stanley Wealth Management on April 16, 2018 founded on accusations that he engaged in unapproved outside business activities involving customers of the firm.
