Securities Arbitration Lawyers BlogComplaint Filed against Morgan Stanley based on Puerto Rico Municipal Bonds
Silver Law Group has filed a complaint on behalf of a family group of investors against Morgan Stanley (CRD# 149777) and financial advisor Angel E. Aquino-Velez (CRD# 2687333) for unsuitable recommendations and concentration of client accounts in Puerto Rico municipal bonds. The allegations against Morgan Stanley and Aquino include unsuitable investment recommendations, failure to diversify, breach of fiduciary duty, and failure to supervise.
Claimants all had accounts with Morgan Stanley managed by Aquino. With a risk profile of conservative to moderate risk and investment goals of retirement, the statement of claim alleges that Aquino concentrated the accounts in Puerto Rico municipal bonds.
The Claimants placed their trust in the hands of their financial advisor hoping to achieve their financial goals but instead Aquino pushed the investments in Puerto Rico debt misrepresenting the risks associated with the bonds. This left the claimants overexposed to the risks of the Puerto Rican economy which was known to be in financial difficulty at the time. With the downgrade and subsequent default by Puerto Rico on its debt the Claimants suffered extensive losses due to the strategy.
During the relevant time and despite the downturn in the Puerto Rican economy, Aquino allegedly continued to recommend the purchase of additional Puerto Rico bonds including Puerto Rico’s final bond issuance before declaring bankruptcy underwritten by Morgan Stanley in 2014. Additionally, Aquino recommended the sale of bonds in the portfolio only to reinvest the proceeds in other Puerto Rico bonds with similar characteristics and risk ratings even if certain trades steered the Claimants to unnecessary risk. Due to the similarity in the bonds being swapped, it does not appear that the objective was to protect or diversify the portfolio. As these bonds are traded at prices that include markups/markdowns which are not disclosed to clients it appears the driving motivation for the transactions was the excessive fees and outrageous commissions charged on the trades.
The unsuitable investments and investment strategy may constitute violations of FINRA Rule 2111 (Suitability) and FINRA Rule 2090 (Know Your Customer). In addition the failure to diversify and/or reduce the concentration or exposure to the municipal bonds as the Puerto Rican economy and credit ratings for the debt deteriorated may constitute a breach of fiduciary duty.
Morgan Stanley has recently been the subject of regulatory action based on their role in underwriting Puerto Rico’s last major bond issue in March 2014 prior to the island declaring bankruptcy. Specifically as of April 2017, two Morgan Stanley bankers have been placed under investigation in connection with disclosures Puerto Rico made in offering documents circulated to investors associated with that debt issue according to FINRA records on Morgan Stanley’s Charles Visconsi and Jorge Irizarry.
Angel E. Aquino-Velez has been the subject of eleven (11) customer complaints, with three (3) of the complaints still pending based on similar allegations in relation to Puerto Rico municipal bonds per FINRA BrokerCheck records.
Contact Our Firm if You’ve Lost Money
If you have invested with Angel E. Aquino-Velez and Morgan Stanley and/or have lost money in Puerto Rico municipal bonds, you may be able to recover some or all of your losses. Our lawyers are experienced in recovering investor losses due to broker and brokerage firm misconduct through FINRA arbitration.
Silver Law Group represents the interests of investors who have been the victims of investment fraud. If you have questions about your legal rights, please contact Scott Silver of the Silver Law Group for a free consultation at ssilver@silverlaw.com or toll free at (800) 975-4345.