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Morgan Stanley Settles FA Expense Class Action for $10 Million

May 1, 2019

Morgan Stanley has agreed to a $10.2 million settlement of a class action lawsuit brought by a former financial advisor who accused the wirehouse of failing to cover the wirehouse advisors’ work-related expenses, including business travel, client entertainment, licensing fees and phone and internet services, according to news reports.

Filed last year by Brandon Harvey, who was with the wirehouse from 2013 until 2018, the suit alleges Morgan Stanley "had a policy and practice of not reimbursing class members” for business expenses.

The settlement would cover around 2,800 California-based financial advisors and private wealth advisors employed by the wirehouse from 2013 until now, according to Law360.com, which cites a proposed settlement filed Monday in California federal court.

Morgan Stanley would offer $8.5 million in cash and agree to around $1.7 million in future payments under the proposed settlement, the legal news publication writes.

Harvey tells Law360.com that the settlement only represents less than 7% of what he sought but that the benefits “substantially outweigh the risk and that settlement at this juncture is in the best interests of the class, aggrieved employees, and the State of California.” California’s Labor Workforce Development Agency would get $450,000 from the cash fund, according to the website. Harvey’s lawyers, the Wynne Law Firm and Markun Zusman Freniere & Compton, have asked for around $2.5 million from the cash fund as well, Law360.com writes. The roughly 2,800 advisors that are part of the settlement would therefore receive around $3,600 each, according to the website.

Harvey also tells Law360.com that he tried to arrange for a global settlement that would settle the claims in Chen v. Morgan Stanley Smith Barney, a similar pending suit, but that he wasn’t able to do so. The website didn’t get a response from either party.

(iStock Photos)

Last year, Finra was particularly tough on one of Morgan Stanley’s former advisors who allegedly improperly expensed the firm a mere $273. The industry’s self-regulator barred John Baldeck from the industry in November for refusing to complete his testimony in the case related to his voluntary resignation from the wirehouse in 2016 following allegations that he had expensed personal meals as client meals.

By Alex Padalka
  • To read the Law360.com article cited in this story, click here if you have a paid subscription.