A Finra arbitration panel has ordered Morgan Stanley to pay compensatory damages to one of its former brokers accused of unauthorized trading, including doing so despite concerns about a client’s mental fitness, the industry’s self-regulator says.
Morgan Stanley discharged David Hugh Bindelglass in December 2017 over allegations he had “acted on instructions from clients’ family members in two households who were unauthorized to transact business in the accounts” and “communicated recommendations and accepted authorizations from clients in two other households, despite concerns regarding the client’s mental acuity,” according to his BrokerCheck record.
Bindelglass denied the firm’s termination explanation in its entirety and added that he “has since obtained sworn affidavits from the persons in question that directly contradict Morgan Stanley’s termination explanation,” according to his broker comment on BrokerCheck.
In November 2018, Bindelglass filed a Finra arbitration claim alleging defamation and tortious interference with prospective economic advantage, seeking $800,000 in compensatory damages, $800,000 in punitive damages, lawyers’ fees and costs, as well as the expungement of his record and any other relief deemed appropriate by the arbitrators, according to an award document published by Finra.
Bindelglass eventually withdrew his defamation claim and agreed to cap his damages sought at $225,000, the industry’s self-regulator says.
Last week, the arbitrators ruled that Morgan Stanley must pay Bindelglass $70,000 in compensatory damages and recommended the expungement of his termination explanation on the Form U5 filed by Morgan Stanley in January 2018, according to the award document. According to the arbitrators, the reason for termination should remain the same while the explanation should state, “Loss of confidence based on employee having conducted several trades without written discretion in two customer accounts.”
The arbitrators recommended the same language be used on the Form U4 filed in February 2018 by Cantella & Co., where Bindelglass registered after getting discharged from Morgan Stanley and remains today, according to BrokerCheck.
Bindelglass has seven customer disputes on his record, dating back to 2006 — all alleging unsuitable recommendations or investments.
One of the disputes was awarded to the tune of $157,267, while the rest were settled for amounts ranging from $5,657 to $750,000, according to BrokerCheck. That last dispute “was settled for business reasons in order to avoid the cost and uncertainty of litigation,” without any contribution from Bindelglass, he wrote in the broker comment section.
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