Ex-Morgan Stanley FAs Claim the Wirehouse Shortchanged Them on Expenses

Financial Advisor IQ - Miriam Rozen
May 8, 2019

Three of its former financial advisors have alleged  Morgan Stanley  shortchanged them and some 2,800 other employees when reimbursing their business expenses. But only one of them,  Brandon Harvey, has  succeeded in securing a tentative $10 million settlement based on his proposed class action lawsuit.

Under the proposed deal, Morgan Stanley would pay Harvey and other former and existing Morgan Stanley employees around $3,600 each.

In addition, Harvey, who worked for Morgan Stanley for four years until 2018 when he left for his current firm  LPL Financial, would receive $10,000 for his services as class representative.

Harvey’s proposed deal, however, still requires court approval.

Meanwhile, the two other former Morgan Stanley FAs intend to fight Harvey and Morgan Stanley’s proposed settlement. Five years ago,  Tracy Chen  and  Matthew Lucadano  filed their own proposed class action lawsuit against Morgan Stanley and were prepared to go to trial in January.

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Morgan Stanley settled with Harvey to preclude Chen and Lucadano from winning with their stronger, more developed class action lawsuit,  Jahan Sagafi, a lawyer at San Francisco’s  Outten & Golden, who represents Chen and Lucadano, writes in the motion.

The Harvey lawsuit has barely been litigated ” but Chen and Lucadano’s lawsuit is poised for trial, ” Sagafi adds.

Morgan Stanley is settling with the weaker case, ” Sagafi says.

Notably, Chen has been barred from the industry by  Finra  for disciplinary reasons.

Chen previously worked for  Citicorp,  Merrill Lynch, Morgan Stanley and, most recently,  Oppenheimer & Co.

In 2016 Chen was permitted to resign from Oppenheimer and barred from the industry after allegations arose about her conversion of firm funds, falsification of firm records, and causing Morgan Stanley’s books and records to be inaccurate,” according to  BrokerCheck.

Lucadano has no disciplinary actions on his record and worked for Morgan Stanley for five years until 2014, when he left for  LPL  Financial.

Asked about whether a barred FA is well-suited to serve as representative plaintiff for a class, Sagafi argues the case against Morgan Stanley doesn’t hinge on one FA’s specific background. ”

When a client wants help challenging their employer’s unlawful practices, we don’t turn them away because of irrelevant side issues, ” he says.

FAs eager to serve as class representatives did not line up at his door, Sagafi notes.

Many victims of corporate wrongdoing, despite knowing that their employers likely broke the law, are reluctant to sue in court. They often express concerns about employer retaliation, even though such retaliation is rare in practice, ” he says.

Spokespersons for Morgan Stanley did not provide a comment for this story.

The federal judge presiding in Harvey’s case has scheduled a hearing for preliminary approval of the settlement on June 12.

Sagafi expects the judge to listen carefully to his clients’ objections to that tentative settlement at that hearing.