SEC Orders Morgan Stanley To Pay $3.6M For Failure To Supervise Barry Connell

Barry Franklin Connell (CRD#: 3070984, Ridgewood, New Jersey) is a past securities broker of Morgan Stanley. Particularly, Connell worked at the firm’s Ridgewood, New Jersey offices from June 1, 2009 to December 7, 2016. Morgan Stanley ended his employment claiming that Connell made unauthorized withdrawals from customers’ accounts. Then, the Securities and Exchange (“SEC”) brought fraud charges against Connell in Complaint #1:17-cv-00831, filed by SEC on February 3, 2017.

SEC Charges Connell With Misappropriation

Primarily, the SEC argues that Connell misappropriated $5,000,000 from his advisory clients. Supposedly, from December 2015 until November 2016, Connell defrauded customers by transferring money out of their accounts. This also included Connell falsifying company forms to wire funds to third parties for Connell’s benefit. The Complaint alleged that Connell effected the scheme in just under a year, making at least 100 transactions without customer or firm authorization. The SEC says Connell used the funds for a private jet service, country club membership, home rentals and more. Because of this, the SEC claims Connell failed to comply with Section 206(1) and 206(2) of the Advisers Act. This matter is currently ongoing.

Morgan Stanley Required To Pay $3.6M Penalty For Failure To Supervise Barry Connell

Subsequently, on June 29, 2018, SEC issued an Order #3-18566 requiring Morgan Stanley to pay a $3,600,000 penalty because of failing to protect investors against securities representatives like Connell misappropriating funds. Indeed, the Order was centered around Morgan Stanley’s failure to supervise Connell. Because of this, SEC pointed out, Connell made $7,000,000 in unauthorized transactions out of four advisory customers’ accounts. Morgan Stanley’s lack of supervision, according to SEC, caused Connell to misappropriate customers’ money to fund his lavish lifestyle. Furthermore, the firm did not discover the fraud until almost a year later. By that time, customers were complaining about the unauthorized transactions. Therefore, SEC stated that Morgan Stanley violated Sections 206(4) and 203(e)(6) of the Advisers Act.

While at Morgan Stanley, Connell engaged in sales practices which managed to cause serious concerns for customers. In fact, the Financial Industry Regulatory Authority (FINRA) BrokerCheck Report for Connell shows that at least 10 customers brought investment disputes concerning Connell’s sales practices at Morgan Stanley. Here’s a summary of some of those disputes:

December 22, 2017 Arbitration Involving Barry Connell Where Investor Claims Misappropriation

 

A customer of Morgan Stanley Smith Barney brought FINRA Arbitration #17-03198 on December 22, 2017. Mainly, the customer claimed that Morgan Stanley Smith Barney or Connell misappropriated the customer’s assets. As a result, the customer alleged $2,193,015 in damages in this pending matter.

June 5, 2017 Complaint Involving Connell Where Investor Alleged Breach Of Fiduciary Duty

A Morgan Stanley customer brought a complaint to the firm’s attention on June 5, 2017. The complaint reportedly concerned Connell’s sales practices. According to the customer, Morgan Stanley or Connell failed to act in the customer’s best interest. Because of the alleged breach of fiduciary duty, the customer brought a claim for compensatory relief. This matter is pending a resolution.

March 17, 2017 Dispute Involving Barry Connell Involving Claim Of Forgery

 

A customer of Morgan Stanley contested Connell’s sales practices in filing a complaint on March 17, 2017. Specifically, the customer claimed that Connell forged checks while working as the customer’s financial advisor. Evidently, Morgan Stanley and the customer agreed on March 16, 2018 for the customer to be paid $725,000.00 to settle the forgery claim.

Lars Soreide Highest Ethical Standard Award 2018

Lars Soreide Highest Ethical Standard Award 2018

FINRA barred Connell on April 21, 2017. If you experienced losses by investing with Morgan Stanley broker Barry Connell, contact Soreide Law Group at (888) 760-6552 and speak with experienced counsel about a possible recovery of your investment losses. Soreide Law Group represents clients on a contingency fee basis and advances all costs. The firm has recovered millions of dollars for investors who have suffered losses due to misconduct of brokers and brokerage firms.