Robert C. David of Farmington Hills, Michigan, a stockbroker formerly registered with Morgan Stanley Smith Barney LLC, has been fined $15,000.00 and suspended for 20 months from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity founded on findings that he falsified customer account information, overconcentrated customers’ accounts in lower-quality securities, and made unauthorized trades during the time that he was employed by Morgan Stanley. Letter of Acceptance, Waiver, and Consent No. 2019062180701 (April 7, 2022).
According to the AWC, from December of 2012 to September of 2018, David falsified customers’ account documents. FINRA states that David altered the net worth information of the customers to get around Morgan Stanley’s restrictions on solicitations of non-investment grade, fixed-income securities. FINRA indicates that the customers were cleared for investments that they should not have been eligible to purchase, given the securities broker dealer’s procedures. David violated FINRA Rule 2010.
The regulator also states that David overconcentrated the customer’s investments in non-investment grade securities from February of 2015 to January of 2019. The customers were advised by David to put a substantial amount of their assets in those securities Standard & Poor’s rated BB or lower or Moody’s rated Ba or lower. The AWC states that the customers took on increased risk because of holding those investments.
As an example, the regulator states that one customer had an $800,000.00 liquid net worth, a goal of capital appreciation, and a moderate risk tolerance. The customer’s information was changed to make it seem like they had $2,500,000.00 in assets in December of 2016. From February of 2015 to January of 2019, unsuitable advice was provided by David regarding fixed-income securities for the customer’s account. This resulted in the customer having as much as 63.15 percent of their liquid net worth placed in those securities.
David violated FINRA Rules 2010 and 2111 for unsuitable advice.
The regulator also states that David made discretionary trades without written authorization from customers. The AWC shows that from January of 2015 to February of 2019, 538 trades were made by David in eight customers’ Morgan Stanley accounts. Morgan Stanley did not allow for David to make discretionary trades in those accounts. David violated FINRA Rule 2010 and National Association of Securities Dealers (NASD) Rule 2510(b).
FINRA Public Disclosure shows that David has been identified in four customer initiated investment related disputes regarding accusations of his conduct while registered with Morgan Stanley. David is identified in a customer initiated investment related written complaint on May 31, 2019, where the customer requested $800,000.00 in damages supported by allegations of unauthorized trading between October of 2010 and May of 2019. According to the complaint, the customer experienced damages on mutual funds, stocks, and corporate bonds.
David is also the subject of a customer initiated investment related written complaint which was settled for $35,000.00 on March 14, 2020, based upon accusations of unsuitable corporate bond investments by David from April of 2015 to March of 2019 when he was associated with MSSB.
On April 21, 2020, another customer initiated investment related FINRA securities arbitration claim involving David’s conduct was resolved for $200,000.00 in damages founded on allegations that the customer was placed into unsuitable corporate bonds between March of 2017 and March of 2019 while David was registered with Morgan Stanley. FINRA Arbitration No. 19-01418.
On December 17, 2020, a different customer initiated investment related complaint regarding David’s activities was settled for $60,000.00 in damages supported by accusations of David’s failure to comply with the customer’s instructions between 2017 and 2019 concerning a Morgan Stanley investment account.
David is also referenced in a customer initiated investment related FINRA securities arbitration claim which was resolved for $85,000.00 in damages founded on allegations of unsuitable trading by David relating to corporate bonds between September 24, 2014, and February 29, 2020. FINRA Arbitration No. 20-01168 (April 28, 2021).
David was discharged by Morgan Stanley on March 5, 2019, based upon accusations of unauthorized trading and making use of false information about customers to arrange bond transactions.
