Arbitration Panel Orders Morgan Stanley to Pay $843,000 for Failing to Protect Elderly Client from Fraud

Posted on February 27th, 2025 at 2:35 PM
Arbitration Panel Orders Morgan Stanley to Pay $843,000 for Failing to Protect Elderly Client from Fraud

From the desk of Jim Eccleston at Eccleston Law

A FINRA arbitration panel has ordered Morgan Stanley to pay $843,000 in compensatory damages to a senior client residing in Florida for failing to protect her from financial fraud. As reported by ThinkAdvisor, the panel found the firm liable for negligence in a case that highlighted the growing risk of elder financial exploitation.

The client alleged that Morgan Stanley breached its fiduciary duty and duties of care owed to a senior investor by not intervening when scammers manipulated her into withdrawing significant funds.

According to the claim, scammers posing as government officials convinced the client that her identity had been used in criminal activity and that her assets would be frozen unless she took immediate action. Over nine days in 2023, she withdrew more than $2 million, including liquidating assets from a life insurance trust and drawing from a line of credit. The scammers, who had access to her account, instructed her to convert funds into gold bars and cryptocurrency. They later collected the gold bars from her residence under the guise of transferring them to a secure government escrow account.

Despite apparent red flags, the client’s Morgan Stanley advisor approved and facilitated the transactions. Her claim highlighted the firm’s failure to recognize clear warning signs of financial exploitation, particularly given the sudden and unusual nature of the withdrawals.

According to ThinkAdvisor, Morgan Stanley denied liability, arguing that the fraud occurred outside the firm and that Kessler misrepresented the purpose of the transfers. Nonetheless, the arbitrators found Morgan Stanley liable and in violation of two FINRA rules designed to safeguard senior investors from fraud schemes.

 

Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.

Tags: eccleston, eccleston law, morgan stanley

Return to Archive

TESTIMONIALS

Previous
Next

Thank you so very much for your guidance, patience, and expertise.

Beth and Steve K.

LATEST NEWS AND ARTICLES

November 26, 2025
Former GWG Chair Charged in Alleged $150 Million Fraud Scheme as Investor Losses Mount

Federal prosecutors have intensified scrutiny of the long-running collapse of GWG Holdings Inc., unveiling criminal charges against Bradley Heppner, the former chair of both GWG and Beneficient.

November 25, 2025
Financial Advisor Accepts FINRA Bar Amidst Investigation into Alleged Misappropriation

A financial advisor affiliated with a credit union connected to Raymond James Financial agreed to an industry bar after declining to cooperate with FINRA’s investigation into allegations that he misappropriated client funds.

November 24, 2025
Kyle Busch Alleges Considerable Losses in Indexed Universal Life (IUL) Scheme

Kyle Busch, a two-time NASCAR Cup Series champion, and his wife Samantha announced that they lost more than $8.6 million in what they describe as a “devastating financial scheme” involving an Indexed Universal Life (IUL) insurance policy.