Ronald Ray Willoughby Jr. (also known as Ron Willoughby) of Tempe Arizona a stockbroker formerly registered with Morgan Stanley has been fined $5,000.00 and suspended for three months from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity founded on allegations of Willoughby making bad short-term unit investment trades in accounts of Morgan Stanley customers. Letter of Acceptance Waiver and Consent No. 2017055692301 (June 6, 2019).
According to the AWC, customers were inappropriately advised by Willoughby regarding the rollovers of unit investment trust positions, which are investment companies registered with Securities and Exchange Commission (SEC) that offer a fixed securities portfolio to investors through a singular public offering. Supposedly, in nine hundred occasions, Willoughby steered customers towards selling the unit investment trusts at least three months before the unit investment trusts matured. Particularly, after just one hundred ninety days on average, customers were told to liquidate their unit investment trusts which carried maturities of fifteen or twenty-four months. Then, Willoughby recommended for the customers to utilize the proceeds for purchases of additional unit investment trusts.
The AWC stated that recommendations made by Willoughby concerned series-to-series rollovers. FINRA noted that the sponsors of unit investment trusts sometimes roll out unit investment products in a series where the new series is offered around the time that the previous series matures. Of significance here is that generally, unit investment trusts in successive series contain identical or very comparable strategies or objectives for investing as compared to prior unit investment trusts in the series.
Also, FINRA noted that the typical costs to unit investment trust purchasers include a creation and development fee (0.5 percent of the unit investment trust offering price), initial sales charge (1 percent of the purchase price) and deferred charge (2.5 percent of the offering price). Customers are generally assessed a deferred sales charge and creation development fee even when rolling over to a successive unit investment trust series. FINRA determined that it may be inappropriate for unit investment trusts to be traded on a short term basis given the costs, structure, and longer term commitments.
In Willoughby’s case, for example, one of his customers was advised to buy a unit investment trust with a strategy of investing in stocks tied to the S&P 500 Dividend Aristocrats Index. The unit investment trust’s objective was capital appreciation. Evidently, nine months prior to the maturity on this unit investment trust, Willoughby advised the customer to sell it and buy the new unit investment trust from that series. FINRA revealed that the new unit investment trust recommended by Willoughby was roughly the same investment as the unit investment trust that the customer was advised to prematurely sell. FINRA concluded that customers were assessed unwarranted sales charges through Willoughby’s recommendations. The regulator stated that Willoughby’s advice was unsuitable given the costs and frequency of the unit investment trust transactions. Consequently, FINRA found Willoughby’s conduct violative of FINRA Rules 2010, 2111 and NASD Rule 2310.
FINRA Public Disclosure confirms that Willoughby has been identified in three customer initiated investment related disputes containing accusations of Willoughby’s misconduct while employed with Piper Jaffray Inc., Morgan Stanley Co. Incorporated, and LPL Financial LLC. Specifically, a customer filed an investment related complaint regarding Willoughby’s activities in which the customer requested $96,000.00 in damages based upon allegations that unauthorized stock trades were effected in the customer’s account while Willoughby was associated with Piper Jaffray Inc.
Then, a customer initiated investment related arbitration claim regarding Willoughby’s conduct was resolved for $87,500.00 in damages supported by accusations that while Willoughby was associated with Morgan Stanley, unit investment trust recommendations made by him were not suitable given the customer’s objectives of investing in conservative investment products for purposes of the customer’s retirement. Moreover, a customer initiated investment related complaint involving Willoughby’s activities was settled for $33,035.29 in damages founded on allegations that the customers were placed into bad unit investment trust products by Willoughby while he was registered with LPL Financial LLC.
Willoughby’s registration with Morgan Stanley has been terminated as of December 12, 2016. Between December 9, 2016 and April 4, 2018, Willoughby was associated with LPL Financial LLC. Since March 7, 2018, Willoughby has been employed by Kestra Investment Services LLC.
