Broker sanctioned for misusing injured kids' money
Posted: Wed Nov 12, 2008 10:06 pm
Ex-Morgan Stanley Broker Barred Over Trades for Kids (Update1)
http://www.bloomberg.com/apps/news?pid= ... pvo6UT3xvI
By David Scheer
Nov. 12 (Bloomberg) -- New York Stock Exchange regulators sanctioned an ex-Morgan Stanley broker for making unauthorized trades in the accounts of injured children, helping to boost his income enough to make him a top performer at the firm.
NYSE Regulation barred Charles Winitch from working at a member firm for five years after investigators found he and a colleague made unsuitable trades in the accounts of children who received medical-malpractice settlements, the watchdog said in a statement today. The transactions generated $537,000 in commissions for the firm from 2004 to 2005, it said.
The kids' accounts ``appear to have been targeted because they were unlikely to notice the unsuitable trading,'' NYSE said. ``The customers suffered harm by paying unnecessary commissions and incurring the risk inherent'' with the trades.
The fees helped Winitch, who worked at the company's Morgan Stanley DW brokerage until 2005, qualify for the firm's Chairman's Club, open only to the top 175 brokers, the regulator said in its decision. Each member got a trip to a five-star resort, a jacket with the firm's crest and a plaque.
Winitch, who unsuccessfully appealed the ruling to the regulator's board of directors, didn't respond to a message left at a Scarsdale, New York, telephone number listed under his name. Jonathan Arfa, an attorney for Winitch, didn't return a call seeking comment.
Reimbursed Clients
``Morgan Stanley takes its supervisory responsibilities extremely seriously,'' spokeswoman Christine Pollak said in an e- mailed statement. ``Since these events took place three or more years ago, the firm has taken remedial measures, reimbursed affected clients where appropriate and put new branch management in place.''
The accounts, which pay for the children's care, were supposed to be invested conservatively in `A'-rated New York State municipal bonds and U.S. Treasuries, with low commissions and no management fees, according to a court order.
Winitch and his colleague, John Steigerwald, arranged a series of short-term trades that generated commissions while taking unsuitable risks, the NYSE panel said in its decision. Trading in one account, for instance, caused a $120 loss while generating $9,150 in commissions, the panel said. In another account, trading produced a $10,400 gain and $95,800 in fees.
Morgan Stanley paid $500,000 last year to settle NYSE claims it failed to ``diligently supervise'' the accounts. The firm didn't admit or deny wrongdoing. The NYSE regulator permanently barred Steigerwald last year after he didn't respond to its allegations.
To contact the reporter on this story: David Scheer in New York at dscheer@bloomberg.net.
Last Updated: November 12, 2008 14:22 EST
http://www.bloomberg.com/apps/news?pid= ... pvo6UT3xvI
By David Scheer
Nov. 12 (Bloomberg) -- New York Stock Exchange regulators sanctioned an ex-Morgan Stanley broker for making unauthorized trades in the accounts of injured children, helping to boost his income enough to make him a top performer at the firm.
NYSE Regulation barred Charles Winitch from working at a member firm for five years after investigators found he and a colleague made unsuitable trades in the accounts of children who received medical-malpractice settlements, the watchdog said in a statement today. The transactions generated $537,000 in commissions for the firm from 2004 to 2005, it said.
The kids' accounts ``appear to have been targeted because they were unlikely to notice the unsuitable trading,'' NYSE said. ``The customers suffered harm by paying unnecessary commissions and incurring the risk inherent'' with the trades.
The fees helped Winitch, who worked at the company's Morgan Stanley DW brokerage until 2005, qualify for the firm's Chairman's Club, open only to the top 175 brokers, the regulator said in its decision. Each member got a trip to a five-star resort, a jacket with the firm's crest and a plaque.
Winitch, who unsuccessfully appealed the ruling to the regulator's board of directors, didn't respond to a message left at a Scarsdale, New York, telephone number listed under his name. Jonathan Arfa, an attorney for Winitch, didn't return a call seeking comment.
Reimbursed Clients
``Morgan Stanley takes its supervisory responsibilities extremely seriously,'' spokeswoman Christine Pollak said in an e- mailed statement. ``Since these events took place three or more years ago, the firm has taken remedial measures, reimbursed affected clients where appropriate and put new branch management in place.''
The accounts, which pay for the children's care, were supposed to be invested conservatively in `A'-rated New York State municipal bonds and U.S. Treasuries, with low commissions and no management fees, according to a court order.
Winitch and his colleague, John Steigerwald, arranged a series of short-term trades that generated commissions while taking unsuitable risks, the NYSE panel said in its decision. Trading in one account, for instance, caused a $120 loss while generating $9,150 in commissions, the panel said. In another account, trading produced a $10,400 gain and $95,800 in fees.
Morgan Stanley paid $500,000 last year to settle NYSE claims it failed to ``diligently supervise'' the accounts. The firm didn't admit or deny wrongdoing. The NYSE regulator permanently barred Steigerwald last year after he didn't respond to its allegations.
To contact the reporter on this story: David Scheer in New York at dscheer@bloomberg.net.
Last Updated: November 12, 2008 14:22 EST