Morgan Stanley Smith Barney Tag Archives

Broker Matthew Forlano in Morgan Stanley Smith Barney Firm Has Customer Complaint

April 1, 2025 | by Staff Attorney

According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Matthew Forlano (Forlano), previously associated with Morgan Stanley Smith Barney, has at least one disclosable event. These events include one tax lien, alleging that Forlano recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.

FINRA BrokerCheck shows a final customer complaint on September 09, 2024.

The Securities and Exchange Commission (‘Commission’) deems it appropriate that cease-and-desist proceedings be, and hereby are, instituted against Matthew P. Forlano (‘Forlano’ or ‘Respondent’). In anticipation of the institution of these proceedings, Respondent has submitted an Offer of Settlement which the Commission has determined to accept. The commission finds that this proceeding concerns insider trading by Forlano in the securities of Maxar Technologies, Inc. (‘Maxar’) based on material nonpublic information provided to him by his nephew, Stephen A. Forlano Jr. (‘Forlano Jr.’). Forlano Jr. had received the material nonpublic information from his friend Anthony Viggiano (‘Viggiano’) who was employed at a global investment bank (the ‘Investment Bank’). Viggiano, in connection with his employment at the Investment Bank, was notified about a potential acquisition of Maxar by at least November 15, 2022. That same day, Viggiano tipped Forlano Jr. about the acquisition. Forlano Jr., in turn, tipped Forlano. Between December 2 and December 15, 2022, Forlano purchased Maxar securities in his brokerage account and tipped a close friend (the ‘Friend’) who also purchased Maxar securities. On December 16, 2022, a press release announced that Maxar had agreed to be acquired in an all-cash transaction valued at approximately $6.4 billion (the ‘Maxar Deal’) and Maxar’s stock price increased nearly 125%. As a result of their purchases of Maxar securities, Forlano profited by more than $8,000 and the Friend generated a profit of over $10,000. Forlano’s conduct violated Section 10(b) of the Exchange Act and Rule10b-5 thereunder.

Advisor Aaron Robert Parthemer Subject to New Customer Allegations

June 22, 2017 | by Staff Attorney

Gana Weinstein LLP is investigating new customer complaints filed with the Financial Industry Regulatory Authority (FINRA) against broker Aaron Robert Parthemer (Parthemer). Our firm has been investigating Parthemer since 2015, when Parthemer was barred from FINRA for engaging in private securities transactions, also known as “selling away”. According to FINRA’s BrokerCheck records for Parthemer, there are 4 new disclosures on his record since his last regulatory action in 2015. These disclosures including customer complaints against Parthemer alleging unsuitable and unauthorized investments, and misrepresentation. Parthemer was barred permanently from FINRA on April 2015. His registration to the New Jersey Bureau of Securities, a self-regulatory organization, was revoke in September 2015.

The most current customer complaint pending against Parthemer is from May 2017, alleging Parthemer made unsuitable investments starting in 2009 when Parthemer was employed at Wells Fargo Advisors and Morgan Stanley Smith Barney. During Parthemer’s stint at Morgan Stanley, the client alleged that Parthemer presented outside investment opportunities that he had a personal interest in, which was unauthorized by the firm. The customer alleged damages of $1,622,844.00.

A second customer complaint was submitted in September 2016 regarding Parthemer’s actions while employed at Morgan Stanley Smith Barney. The customer alleged that Parthemer solicited the client to invest in outside investments that were not authorized by Morgan Stanley. The alleged damages are $205,000.00 and is still pending.

FINRA Bars Broker Chase Casson For Failing to Respond to Inquiries Over Private Transactions

January 23, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) recently barred broker Chase Casson (Casson) alleging that Casson failed to provide documents and information to FINRA in response to demands made to investigate the broker’s activities. On various dates in August and September 2014, FINRA sent Casson a request for documents concerning allegations that he participated in a private securities transactions. The details concerning the exact nature of the alleged transaction and Casson’s role are not yet fully known.

The allegations against Casson are consistent with a potential “selling away” securities violation. In the industry the term selling away refers to when a financial advisor solicits investments in companies, promissory notes, or other securities that are not pre-approved by the broker’s affiliated firm. Under the FINRA rules, a brokerage firm owes a duty to properly monitor and supervise its employees in order to detect and prevent brokers from offering such products. In order to properly supervise their brokers each firm is required to establish and maintain written supervisory procedures and implement such policies in order to monitor the activities of each registered representative. Selling away often occurs in environments where the brokerage firms either fails to put in place a reasonable supervisory system or fails to actually implement that system and meet supervisory requirements.

In selling away cases, investors are unaware that the advisor’s investments are either not registered or not real. Typically investors will not learn that the broker’s activities were wrongful until after the investment scheme is publicized or the broker simply shuts down shop and stops returning client calls.

Morgan Stanley Fined $5,000,000 For Failure To Supervise Sales of IPO’s

June 16, 2014 | by Staff Attorney

On May 6, 2014, the Financial Industry Regulatory Authority (FINRA) announced that it had fined Morgan Stanley Smith Barney LLC $5,000,000 for failure to properly supervise the solicitation of retail clients to invest in initial public offerings (IPOs). According to FINRA, Morgan Stanley sold shares to its retail customers in eighty-three different IPO’s between February 16, 2012 and May 1, 2013, with insufficient procedures and employee education. Some of the more commonly sold IPOs included Facebook and Yelp among other Internet favorites.

When broker dealers sell IPOs, there is a process in place for soliciting customer interest. Prior to the effective date of the registration statement, firms may only obtain an “indication of interest” from customers. An “indication of interest” is not a purchase. In order for an “indication of interest” to result in a purchase the investor must reconfirm their interest after the IPO registration statement becomes effective. Broker dealers may also solicit what is known as “conditional offers to buy.” This differs from an “indication of interest” in that the investor does not have to reconfirm. It may bind the customer after the registration statement becomes effective if the investor simply takes no action to revoke the conditional offer before the brokerage firm accepts it. According to FINRA, Morgan Stanley Smith Barney failed to institute adequate procedures and properly train its employees to ensure that its staff clearly differentiated an “indication of interest” from a “conditional offer” in their solicitation of potential investors.

Morgan Stanley Smith Barney actually adopted a policy related to the solicitation of IPO’s. In adopting this policy back on February 16, 2012, however, the firm used the terms “indication of interest” and “conditional offer” interchangeably, which implicitly disregarded the need for customer reconfirmation prior to trade execution. According to FINRA, Morgan Stanley never provided its sales teams and financial advisers any education or materials explaining the differences in terminology. As a consequence there was a strong possibility that neither the Morgan Stanley staff nor its customers properly understood the type of order that was being solicited. In addition, FINRA found that Morgan Stanley’s inadequate policies failed to comply with the federal securities laws and other FINRA rules.

Managed Futures Funds Erase Investor Gains with Excessive Fees

November 5, 2013 | by Staff Attorney

From January 2003 through the end of 2012, Morgan Stanley enticed over 30,000 customers to invest $797 million collectively into a managed-futures fund called Morgan Stanley Smith Barney Spectrum Technical L.P. The prospectus for Spectrum Technical fund characterized the fund as potentially profitable “when traditional markets are experiencing losses” and recommended the fund as a way to diversify beyond traditional stocks and bonds. The prospectus boasted that over a twenty-three year period, people who invested ten percent of their assets in managed futures outperformed portfolios comprised only of stocks and bonds.

The Spectrum Technical fund earned $490.3 million in trading gains and money-market interest income from 2003 through 2012. However, investors who remained in the fund during this period did not receive any of the returns because the commissions, expenses, and fees paid to fund managers and Morgan Stanley totaled $498.7 million. Thus, Spectrum Technical investors lost $8.3 million simply because the fees charged to the fund were greater than the gains.

Morgan Stanley advertised to clients that its managed futures funds performed well when the stock market was hit hard in 2000 and late 2007 and even gained 22.5 percent after fees in 2008. The firm further stated that it only sells these funds to qualified investors, and that it clearly defines the risks and fees for customers. Although these disclosures may provide insight as to the effect of fees on investor gains, information regarding fund managers’ conflicts of interest is often buried deep in the fund’s prospectus or regulatory filings.