FINRA Bars Morgan Stanley’s Stewart Malloy For Failure To Testify In Investigation

Stewart Clinton Malloy (CRD#: 1029931, Riverhead, New York) is a now-terminated Morgan Stanley broker who the Financial Industry Regulatory Authority (“FINRA”) barred on January 19, 2019 for his failure to attend an on-the-record interview during an investigation into his trading practices. Evidently, FINRA’s Office of Hearing Officers issued a Default Decision in Case #2016051299201, finding Malloy violated FINRA Rules 8210 and 2010.

Malloy Fails To Testify In FINRA Investigation About Unsuitable And Unauthorized Trades

The Decision stated that FINRA’s Department of Enforcement investigated Malloy’s trading practices to determine if he made unsuitable and unauthorized trades in customer accounts. Evidently, FINRA launched an investigation after Morgan Stanley submitted a Form U5. This filing conveyed that Malloy made bad recommendations to customers about investments. Supposedly, those customers followed Malloy’s recommendations and lost $1,000,000.00.
Apparently, in connection with this investigation, FINRA’s Department of Enforcement asked Malloy to appear for an interview and testify. However, Malloy did not show up for it. FINRA’s Hearing Officer stated in the Decision that the Department of Enforcement served Malloy a Complaint two times. However, Malloy did not respond to the Complaints. Eventually, FINRA’s Department of Enforcement filed a Default Motion. The Decision stated that Malloy failed to respond to the Default Motion. Accordingly, the Hearing Officer granted the Motion and barred Malloy from having any association with a FINRA member in all capacities.
Malloy’s FINRA BrokerCheck Report shows at least eight customers filed disputes about his sales practices. Here is a summary of the more recent complaints:

August 29, 2016 Arbitration Alleging Malloy’s Unsuitable Option Trading

Morgan Stanley Smith Barney customers filed a FINRA Arbitration #16-02490 on August 29, 2016 about Malloy’s sales practices. Mainly, the customers stated that Malloy made unsuitable trades of stock and options in their investment accounts. Because of this, Morgan Stanley and the customers agreed for the firm to pay them $300,000.00 in compensation. Accordingly, this matter settled October 4, 2017.

October 25, 2016 Complaint Alleging Malloy’s Bad Energy Stock Trades

 
Children of a Morgan Stanley customer disputed Malloy’s activities by filing a complaint on October 26, 2016. Allegedly, Malloy made unreasonable and inappropriate energy stock purchases for the customer. Supposedly, the customer incurred investment losses on those energy stocks. Therefore, Morgan Stanley compensated the customer to the tune of $60,000.00. However, the firm did not admit liability in the February 12, 2016 settlement.

January 4, 2013 Complaint Alleging Malloy’s Unauthorized Trading

 
A customer of Morgan Stanley contested Malloy’s sales practices by bringing a complaint to the firm’s attention on January 4, 2013. Notably, the customer alleged that Malloy made unauthorized trades in the customer’s account. Apparently, the customer did not consent to the stock transactions, and the trades caused the customer to experience losses. As a result, Morgan Stanley moved to settle the customer’s unauthorized trading claim on February 12, 2013, paying the customer $28,000.00.
In prior complaints, customers of Morgan Stanley and Merrill Lynch made allegations of Malloy’s unsuitable trading, discretionary trading, churning of investments, unauthorized transactions, and breach of fiduciary duty. Morgan Stanley disaffiliated with Malloy on October 2, 2015.

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