After an investigation, the Financial Industry Regulatory Authority’s Department of Enforcement filed a complaint Monday against a former Morgan Stanley broker and current WestPark Capital rep, claiming he repeatedly recommended costly and unsuitable investments for his clients while representing both firms.
From January 2014 to January 2018, Stephen Sloane recommended an unsuitable investment strategy to 14 retail customers, according to the complaint.
Morgan Stanley, WestPark and Sloane did not immediately respond to requests for comment on Tuesday.
Specifically, Sloane recommended that customers “engage in active, short-term trading of U.S. Treasuries with 10- and 30-year maturities, without conducting reasonable diligence to understand the effect of the strategy’s costs on the Treasury customers’ potential returns,” the regulator alleged.
“Sloane, therefore, did not have a reasonable basis to recommend the strategy,” FINRA said, adding that after he recommended that strategy, the customers “actively bought and sold long-term Treasuries every few months.”
Sloane was a rep with Morgan Stanley from June 2009 until it fired him Feb. 29, 2016 over concerns “regarding cost-related issues associated with” his trading of U.S. treasuries, FINRA said, quoting a Form U5 filed by the wirehouse. The firm had earlier requested that he reduce the costs to customers going forward, which he did but only temporarily, according to FINRA.