Former Morgan Stanley Registered Representative Consents to FINRA Sanctions to Resolve Allegations of Engaging in Unsuitable Trading Pattern involving Unit Investment TrustsMonday, June 17, 2019
The Financial Industry Regulatory Authority (FINRA) Department of Enforcement recently approved a Letter of Acceptance, Waiver and Consent (AWC) to resolve allegations of securities industry rules violations against former general securities representative Ron Ray Willoughby, Jr.
Willoughby became registered with FINRA in 1994 as a General Securities Representative with Merrill Lynch, Pierce, Fenner & Smith Incorporated in New York, New York. He has since been registered with six other brokerage firms. Within the last ten years, he was associated with Morgan Stanley (June 2009 to December 2016) and LPL Financial LLC (December 2016 to April 2018), both of which are located in Tempe, Arizona. Willoughby was most recently associated with Kestra Investment Services, LLC in Venice, California from March 2018 to June 2019.
According to the AWC, Willoughby engaged in an unsuitable pattern of short-term trading of Unit Investment Trusts in customer accounts from July 1, 2012 to December 31, 2014, while associated with Morgan Stanley. UITs are investment companies that offer fixed portfolios redeemable shares of securities in a public offering. Generally 15 to 24 months after the initial offering, the underlying securities are sold and the proceeds are paid to investors at the termination date. UITs offer investors an opportunity to invest in a diversified securities portfolio with a low initial investment requirement and are meant to be held to their termination date. If an investor sells a UIT before the termination date and purchases another, the investor incurs front-loaded sales charges that would have been avoided if the UIT had been rolled over to a new UIT at the termination date.
Willoughby allegedly recommended his customers roll over UITs more than 100 days before maturity on over 900 occasions. Over 100 of these transactions were “series-to-series” rollovers meaning UITs were rolled over before maturity to purchase a subsequent series of the same UIT. FINRA views this as an unsuitable recommendation not only because the UITs were rolled over prior to maturity but also because the series-to-series rollovers had the same or similar investment objectives and strategies as the prior series. FINRA asserts that Willoughby’s recommendations were unsuitable and caused customers to incur unnecessary sales charges.
Based on the foregoing, Ron Willoughby violated NASD Rule 2310 and FINRA Rules 2111 and 2010. By signing the AWC, Willoughby consented to a three-month suspension from associating with any FINRA member firm and a $5,000 fine.
If a broker was not properly supervised while registered at a brokerage firm, the firm can be held liable for the broker’s misconduct. Did your broker’s misconduct cost you money? If so, you may be able to recover from your broker or the brokerage firm where he or she was registered. Since 1998, the attorneys at ChapmanAlbin have been representing victims of investment fraud and broker misconduct. Call us (1-877-410-8172) today for a free, no obligation consultation.