FINRA Fines, Suspends Ex-Morgan Stanley Rep for Allegedly Hogging Commissions

The Financial Industry Regulatory Authority fined a former Morgan Stanley broker $2,500 and suspended him from associating with any FINRA member firm in all capacities for 15 days for allegedly increasing his commissions at the expense of another rep at the wirehouse by recording many transactions under only his own production number.

Without admitting or denying the broker-dealer self-regulator’s findings, John Patrick Miller signed a FINRA letter of acceptance, waiver and consent on Dec. 10, consenting to the sanctions to settle FINRA’s allegations. A FINRA attorney signed the letter on Dec. 22.

Morgan Stanley and Marc S. Dobin, a Jupiter, Florida, attorney who represented Miller, declined to comment on Wednesday.

Several Reps Affected

Miller was one of several brokers that Morgan Stanley fired last year over alleged abuses in its Former Advisor Program that enables brokers retiring from the firm to split fees and commissions with brokers who inherit their client accounts if they don’t compete after leaving the firm.

Miller first became registered with FINRA in July 2011 as a general securities representative through an association with Morgan Stanley, according to his report on FINRA’s BrokerCheck website. Initially registered as a broker, he also became a registered advisor in 2017.

On Nov. 30, 2020, Morgan Stanley filed a Form 5 Uniform Termination Notice, disclosing that Miller was discharged over allegations that he “submitted transactions under his sole production number, at the instruction of the senior member of his team,” according to a disclosure on his report.

That was “inconsistent with the agreement entered into between the representative and others and a retired representative, resulting in a shortfall of revenue credited to the other representative,” the disclosure went on to say.

Code Changed for 186 Trades

From September 2015 through January 2018, Miller allegedly “changed the representative code for 186 trades, causing the trade confirmations to show an inaccurate representative code,” according to the FINRA AWC letter.

Although the firm’s system “correctly prepopulated the trades with the applicable joint representative code, Miller changed the code for the 186 trades to his personal representative code,” FINRA alleged.

“Because Miller was directed to change the representative code by the senior team member, who was friends with the retired representative, Miller believed that the retired representative had agreed to the changes, but he had not,” according to the AWC letter.

In December 2020, Morgan Stanley paid restitution to the retired representative, and in January 2021, Miller reimbursed the firm $12,185, which is about the amount of additional commissions that Miller received from the 186 trades as a result of his changing the representative code on the trades, FINRA said.

But as a result of his actions, “Miller caused Morgan Stanley to maintain inaccurate books and records,” in violation of FINRA Rules 4511 (general requirements) and 2010 (governing standards of commercial honor and principles of trade), FINRA said.

Since Dec. 3, 2020, Miller has been registered with FINRA as a rep through his association with International Assets Advisory in Jacksonville, Florida, and as an advisor via his association with that firm’s International Assets Investment Management division.

‘No Warning’

The exact number of brokers terminated by Morgan Stanley in 2020 was not clear.

But AdvisorHub, which first reported that story last year, said about 10 brokers were fired after a nationwide investigation into brokers who were believed to be recording trades in the Former Advisor Program incorrectly.

Dobin confirmed to ThinkAdvisor last year that he was representing Miller, a $1.5 million-producing broker in Ponte Vedra Beach, Florida, after the rep was fired by Morgan Stanley.

Miller had been with Morgan Stanley for his entire nine-year career before being fired by the firm, Dobin noted at the time, adding: “The firm talked to him at some point prior to this about it. But there was no warning that he was going to be fired.” Miller “started with Morgan Stanley as a receptionist” before becoming a broker, Dobin said.

(Pictured: Morgan Stanley headquarters in New York; Photo: Bloomberg)