Morgan Stanley Ordered to Pay $11.7 Million Over Unauthorized Covered Call Strategy

Posted on December 13th, 2022 at 3:16 PM
Morgan Stanley Ordered to Pay $11.7 Million Over Unauthorized Covered Call Strategy

From the Desk of Jim Eccleston at Eccleston Law.

A Financial Industry Regulatory Authority (FINRA) arbitration panel has ordered Morgan Stanley to pay a former client $11.7 million over an allegedly unauthorized call options strategy.

The arbitration award includes $11.5 million in compensatory damages as well as $158,000 in costs, according to the award. The former client filed his arbitration claim in August 2021 alleging that the firm failed to supervise sales of covered calls on large technology holding companies, including Nvidia Corp., Tesla Motors, Apple, Salesforce, and Microsoft Corp. Nowak initially sought tens of millions in damages constituting “lost opportunity” or foregone gains after the shares were called away between 2018 and 2021.

The firm “strongly disagrees with the award” and is evaluating its options, including whether it could ask the court to overturn the decision, according to a Morgan Stanley spokesperson. The advisor, Craig Thistlethwaite, was an unnamed party in the arbitration and the arbitration panel denied Morgan Stanley’s request for expungement of the matter from Thistlethwaite’s record. Nowak additionally pursued sanctions against Morgan Stanley for allegedly failing to preserve evidence as it did not keep text messages between Nowak and Thistlethwaite. The firm’s defense, that the messages were on personal phones because Nowak and Thistlethwaite were “close friends”, apparently fell on deaf ears as securities rules and regulations nonetheless require firms to adopt supervisory systems to monitor, detect and prevent such communications.

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

Tags: eccleston, eccleston law, advisors, law, morgan stanley, finra

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