A New Mexico couple has been awarded more than half a million dollars by a Financial Industry Regulatory Authority arbitration panel after a Morgan Stanley broker put their assets in inappropriately complex investments.
The panel agreed with the couple's argument that the broker's allocations cost them gains over 10 years, awarding them $519,089.
Stephen and Brenda Balok, both in their 50s, went to a Morgan Stanley broker after Stephen Balok was forced into early retirement when his employer, Public Service Co. of New Mexico, downsized, said Clinton Marrs, owner of Marrs Griebel Law in Albuquerque and the Baloks’ attorney.
The Baloks were interested in investing in such things as certificates of deposit but eventually were placed in complex junk bonds, ETFs based on derivatives and futures contracts, and options contracts concentrated in the oil and gas industries, Marrs said.
There was no supervision of the investments selected by the broker, Tim J. Prouty, who treated the Baloks as sophisticated investors, which they were not, Marrs said. The $1 million portfolio gained $120,000 over a 10-year period. The Baloks argued they would have gained another $519,089 if the investments had been placed in a traditional portfolio of 60 percent equities and 40 percent bonds, and the arbitration panel agreed, awarding the Baloks that amount.
Morgan Stanley “disagrees with the panel’s decision and does not believe that the evidence supported the panel’s award in this case,” said Susan Siering, the firm's head of wealth management media relations, in an email.
Most of the losses were suffered between 2012 and 2015, according to the arbitration panel. Morgan Stanley touted its advisory services and fiduciary duty to the Baloks when they placed the investments, Marrs said.