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FINRA Bars Ex-Morgan Stanley Rep Accused of Using Client Credit Line for Himself

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What You Need to Know

  • Morgan Stanley allowed the ex-broker to resign after a client alleged he used a client credit line for himself.
  • FINRA barred him after he refused to cooperate with its investigation into his termination from the firm.
  • Through his lawyer, the broker denied the client's claim.

The Financial Industry Regulatory Authority barred a former Morgan Stanley broker who allegedly helped himself to more than $61,000 from a client credit line for his own personal use and then refused to cooperate in the industry self-regulator’s investigation into his actions, according to FINRA.

Without admitting or denying FINRA’s findings, Jesus Rodriguez signed a FINRA letter of acceptance, waiver and consent on Nov. 23 in which he consented to a bar from associating with any FINRA members in all capacities as part of a settlement. FINRA signed the letter Monday.

Rodriguez first became registered with FINRA in 2005. In June 2009, he registered through Morgan Stanley as a general securities representative, according to FINRA.

On Sept. 3, Morgan Stanley filed a Form U5 termination notice in which it disclosed Rodriguez had resigned a month earlier following “[a]llegations regarding registered representative’s use of client line of credit for his personal benefit.”

According to his report on FINRA’s BrokerCheck website, a dispute was filed against him on July 15 in which clients alleged the broker “used their line of credit for his personal benefit.” The complaint requested damages of $61,431 and is still pending, according to the BrokerCheck report.

Additional Disputes Followed

After his resignation from Morgan Stanley, five more client disputes were filed against him, all still pending. First, on Aug. 23, a client alleged funds were misappropriated from her account in March 2020, and she requested $28,000. On the same day, another client alleged that funds were withdrawn from their account without their knowledge.

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On Aug. 30, another client alleged there were unauthorized withdrawals from her account and requested $266,000 in damages. On Sept. 9, another client alleged funds were misappropriated from their accounts and there were “unauthorized mutual fund trades as well.” On Sept. 28, another client alleged there were fraudulent withdrawals from his account.

It was not clear on Tuesday if Morgan Stanley was aware of the other client disputes when Rodriguez was allowed to voluntarily resign. The firm declined to comment.

On Oct. 8 and 15, FINRA sent requests to Rodriguez for the production of information and documents. However, he would not produce the information or documents requested, according to the AWC letter.

As a result of his actions, Rodriguez violated FINRA Rules 8210 and 2010, FINRA alleged.

Not cooperating with a FINRA investigation is a surefire way for a broker to be barred. “Mr. Rodriguez has had a distinguished career in the financial services industry and is devoted to the interests of his clients,” Kevin Galbraith of The Galbraith Law Firm in New York, who represented Rodriguez in the FINRA dispute, told ThinkAdvisor by email on Tuesday.

The attorney added: “He unequivocally rejects the allegation made by this client. While he does not dispute the fact that he chose not to participate in FINRA’s investigation and as a result received a bar, that decision should not be misconstrued as an acknowledgement that he engaged in any misconduct whatsoever. Regarding the additional client disputes reflected on Mr. Rodriguez’s BrokerCheck report, he vigorously denies each of them.”