Law Offices of David Harrison Announce Investors Win $825,000 in FINRA Arbitration for Morgan Stanley Smith Barney’s Failure to Properly Conduct Pre-Hiring Due Diligence

BEVERLY HILLS, Calif., Feb. 03, 2016 -- Law Offices of David Harrison announce a FINRA arbitration panel on February 1, 2016 rendered its decision and ordered Morgan Stanley Smith Barney, LLC (“Morgan Stanley”) to pay a total of $825,000 to two clients of the firm. The $825,000 award consists of $660,000 in compensatory damages, $165,000 in punitive damages and interest.  The panel found Morgan Stanley’s “hiring process was not sufficient to vet the financial advisor who was the cause of the losses incurred by the Claimants.” The award is Lewis et al. v. Morgan Stanley, FINRA Case No. 14-01604. 

The evidence at the arbitration hearing showed the Morgan Stanley broker, Anna Khai (a.k.a. Anna Khatchatrian) borrowed money and solicited Morgan Stanley customers to invest in non approved investments, using the firm’s infrastructure (e.g., offices, emails, computers, fax machines) to conduct transactions.

“Firms are required to perform due diligence on prospective hires. If a brokerage firm fails to live up to their obligations, FINRA arbitrators will hold them accountable for their wrongdoing,” said David Harrison who represented the investors in the case.  NASD Rule 3010(e) mandates a brokerage firm to ascertain by investigation the good character, business reputation, qualifications and experience of a job applicant and requires an extensive, thorough and diligent investigation of a potential applicant’s background.

“Effective supervision starts prior to hiring,” said David Harrison.  FINRA places no limits on the scope on an applicant’s background investigation, including using private background checks, credit reports and reference letters.  “When a broker is given access to investors’ life savings it is critical for the employer to ensure that they are honest and trustworthy,” added Mr. Harrison.

Law Offices of David Harrison is a nationally known securities arbitration law firm with a proven track record of recovering losses for investors.  Mr. Harrison can be contacted by email at [email protected]  or (310) 499-4732.  The firm website is www.FinraSecuritiesAttorney.com.