Investigation into Steven M. Wyatt

Sonn Law Group is investigating claims related to former broker Steven M. Wyatt (CRD#2522129). Wyatt was most recently associated with Morgan Stanley Smith Barney and Morgan Stanley & Co. (collectively referred to as “Morgan Stanley”) in Ridgeland, Mississippi having worked there from December 2007 through July 2012. Prior to joining Morgan Stanley, Wyatt was associated with Citigroup Global Markets, Inc. (“Citigroup”) from September 1994 through December 2007. Wyatt has been suspended and fined by the Financial Industry Regulatory Authority (“FINRA”) and is not currently working as a financial adviser in the industry.

Morgan Stanley’s Failure to Heed Warnings

Wyatt was suffering from depression and had contemplated suicide, yet his supervisors neither offered help nor expressed any concern regarding his erratic behavior. Over the course of five years, both compliance and Wyatt’s supervisors took notice of Wyatt’s behavior without intervention. Wyatt was not sleeping and would go to the office at 3 or 4 in the morning according to one of many internal reports regarding Wyatt. At some point, Morgan Stanley did stop Wyatt from trading in his own accounts due to his questionable behavior, yet Morgan Stanley continued to allow Wyatt to trade in his clients’ accounts.

Less than a year after Wyatt joined Morgan Stanley, the Mississippi branch risk officer drafted a list of 10 problems relating to Wyatt that triggered attention. Another broker pulled clients she initially brought to Wyatt due to erratic returns and behavior. Compliance documented that Wyatt wasn’t paying attention to what he was doing in his clients’ accounts. Finally, Wyatt’s own assistant called Morgan Stanley’s internal human resources hotline. Still nothing happened.

In 2011, Morgan Stanley finally began investigating Wyatt’s behavior. That internal investigation, led to a mere reprimand for unauthorized trading. As time went on, more internal reports were filed and a client’s lawyer reached out to Morgan Stanley to notify them that Wyatt was using personal email to induce clients to purchase investments that he personally held. Finally, in June 2012 (more than two years after Wyatt’s assistant reported him), Wyatt was finally fired after allegations relating to his participation and solicitation of unapproved outside investments.

Regulatory Problems

Wyatt’s erratic behavior and poor decisions caught up to him. In July 2014, Wyatt signed a letter of Acceptance, Waiver and Consent (“AWC”) which was accepted by FINRA agreeing to a four month suspension from working in the financial industry in any capacity, a monetary sanction in the amount of $12,500, and the entry of findings of selling away, falsifying compliance attestations, and failure to notify his firm of his relationship with an outside company.

On May 3, 2016, following a two month investigation by the Mississippi Secretary of State’s Office into various possible breaches of the Mississippi Securities Act, Wyatt was permanently barred from the Mississippi financial industry. According to the state of Mississippi’s settlement with Morgan Stanley, Morgan Stanley failed to reasonably supervise Wyatt, and both Wyatt and his immediate supervisor were permanently banned from the securities industry. Morgan Stanley also agreed to create a multimillion dollar reimbursement fund to cover a portion of the money Wyatt’s customers claim in losses.

Other Customer Complaints

A.       Awards

  1. In January 2012, a complaint was filed with FINRA alleging unsuitability, unauthorized and excessive trading, churning, manipulative and deceptive practices, violations of SEC Rule 10b-5, fraud, common law negligence and violation of FINRA rules. The alleged damages were $1,000,000.01. On May 23, 2016, an award was granted finding Wyatt jointly and severally liable and ordered him to personally pay $150,000 plus interest in compensatory damages;
  2. In March 2011, a case was filed against Wyatt alleging negligence, gross negligence, suitability, fraud, and breach of fiduciary duty with alleged damages of $80,554.00. An award was granted by the arbitration panel ordering Wyatt to personally pay a total of $265, 343.96; and
  3. In February 2010, a case was filed with FINRA alleging excessive trading and unsuitable transactions with alleged damages of $2,697,566. In June 24, 2013, an arbitration award was granted in the amount of $387, 856.15.

B.       Settlements

  1. On February 26, 2016, a complaint was received by FINRA alleging unspecified damages with allegations of improper investment management. On July 8, 2016, Morgan Stanley reported settling this complaint for $371,657.00 to avoid the costs and uncertainties of litigation;
  2. On August 22, 2011, a complaint was received by FINRA alleging unsuitable investments in common and preferred stock with alleged damages in the amount of $173,000.00. The matter was settled on February 23, 2016 for $40,000 to avoid the costs and uncertainties of litigation;
  3. .On September 15, 2015 a complaint was received by FINRA alleging unspecified damages with allegations of improperly managed investments. On July 7, 2016, the matter settled for $30,000 to avoid the cost and uncertainties of litigation;
  4. On July 10, 2014, a complaint was received by FINRA alleging breach of fiduciary duty and alleging damages of $647,037.00. On February 3, 2016, the matter settled for $408,000 to avoid the costs and uncertainties of litigation;
  5. On April 4, 2013, a complaint was received by FINRA alleging breach of fiduciary duty, churning, omission of facts, misrepresentation, fraud, negligence, unsuitability, violation of SEC rules and firm internal guidelines, and manipulation of trading errors and alleging damages of over $1,700,000.00. In July 2014, FINRA was notified that the matter settled for $440,000;
  6. On March 19, 2013, a complaint was received by FINRA alleging violations of various regulatory rules and state and federal statutes, breach of contract, breach of duties of good faith and fair dealing, breach of fiduciary duty, negligence, and gross negligence. Around April 2015, the matter was settled for $371,396.00 in order to avoid the costs and uncertainties of litigation; and
  7. On March 21, 2013, a complaint was received by FINRA alleging violations of industry rules and standards of care, breach of fiduciary duty, excessive turnover, fraud and/or negligence misrepresentation, violation of SEC rules and Morgan Stanley’s internal guidelines, risky and speculative trading, manipulation of trading errors, failure to disclose information, failure to detect and stop conflicts of interest, and failure to detect and stop outside business activities and alleging damages in the amount of $2,305.673.00. In or about September 2014, the matter settled for $385,500.00 to avoid the costs and uncertainties of litigation.

C.       Pending

  1. On November 26, 2014, a complaint was received by FINRA alleging unauthorized trading, unsuitable investments, and misrepresentation with alleged damages in the amount of $1,000,000.00.

The Financial Industry Regulatory Authority (“FINRA”) holds brokerage firms to high standards. A brokerage firm must have a reasonable basis to believe that a transaction is the right fit for you based on their awareness and understanding of your investment profile. The brokerage firm must consider your age, other investments, investment objectives, investment experience, risk tolerance, investment time horizon, liquidity needs, and the like. A broker can be held liable for making unsuitable investment recommendations. Recommendations must be suitable. Member brokerage firms are also barred from presenting misleading information to get you to buy or sell an investment.

Further, FINRA member firms are responsible for the supervision of a broker’s activities while the broker is registered with their firm. Therefore, Morgan Stanley may be liable for investment or other losses suffered by Wyatt’s customers.

If you were a client of Morgan Stanley Smith Barney, Morgan Stanley & Co. or Steven M. Wyatt and have experienced investment losses or irregularities in your investment accounts, please call Sonn Law Group at 844-689-5754 or click here to access our contact form. Sonn Law Group is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies.

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