The securities attorneys at Gana Weinstein LLP are currently investigating Morgan Stanley broker James Duffy (Duffy). According to BrokerCheck Records kept by the Financial Industry Regulatory Authority (FINRA), Duffy has been subject to five customer disputes, one of which is still pending. The majority of these disputes concern the unsuitable recommendation of Puerto Rico Municipal Bonds.
Most recently, In July 2018, a customer alleged that from 2006 to 2017, Duffy was unsuitably recommending Puerto Rico municipal bonds to the customer. This dispute is currently still pending.
In December 2016, a customer alleged that from 2008 to 2016, Duffy was recommending unsuitable investments. The client requested $250,000 in damages.
In September 2012, a customer alleged that from November 2008 to May 2012, Duffy misrepresented the stability of principals in investment recommendations that were unsuitable to the customer’s investment objectives. The case was settled at $8,000.
Brokers have recommended Puerto Rico bonds over the past decade as an attractive high yielding investment that is triple-tax free – meaning interest earned is free of federal, state, or local taxes. However, Puerto Rico municipal bonds are speculative investments based upon the deteriorating finances of the island. According to some source Puerto Rico bond investors recovery ranges could be as low as 10 to 20 cents on the dollar when the island emerges. Why so little? How much can $70 to $100 billion be worth when there are only 1.4 million workers in Puerto Rico and a 45% poverty rate? In fact, workers are leaving the island in record numbers that will soon be made worse by Hurricane Maria. 84,000 people moved from Puerto Rico to the United States in 2014 resulting in 1.8% of the whole island leaving Despite the speculative nature of the investment, many brokers have been accused of peddling these bonds in large concentrations to clients.
Brokers in the financial industry have to understand more than just the yield on a bond and its tax benefits and they have to accurately portray this to the investor. Under FINRA rulings, brokers are mandated to make suitable investment recommendations for their client. The suitable analysis has certain requirements. First, there must be reasonable basis for the recommendation for the investment. A reasonable basis is attained through the broker’s and the firm’s investigation and due diligence. The broker must also perform due diligence on the investment. Common due diligence looks into the investment’s properties including its benefits, risks, tax consequences, the issuer, the likelihood of success or failure of the investment, and other relevant factors. Second, if there is a reasonable basis to recommend the product to investors the broker then must match the investment as being appropriate for the customer’s specific investment needs and objectives.
Duffy has been in the securities industry since 1987 and has been registered with Morgan Stanley since June 2009. From April 2007, Duffy was registered with Morgan Stanley & Co. Incorporated. From April 2006 to April 2007, Duffy was registered with Morgan Stanley DW Inc. From March 2006 to May 2006, Duffy was registered with Merrill Lynch, Pierce, Fenner, & Smith Incorporated. From August 2000 to March 2006, Duffy was registered with Advest, Inc. From August 2000 to March 2006, Duffy was registered with First Union Securities, Inc.
Gana Weinstein LLP’s securities attorneys represent investors who have suffered securities losses due to the mishandling of their accounts and recommendations to purchase Puerto Rico bonds. The majority of these claims may be brought in securities arbitration before FINRA. Our consultations are free of charge and the firm is only compensated if you recover.