The Securities and Exchange Commission charged Morgan Stanley broker Jesus Rodriguez with securities fraud, alleging he misappropriated $3.5 million from 10 customers through a fraudulent scheme he ran while at Morgan Stanley. In October 2023, Rodriguez was arrested at the US-Mexico border on charges of exploitation of elderly for allegedly taking $56,000 in an elderly couple's bank account without their consent.
According to the SEC's complaint, Jesus Rodriguez (CRD #4888685) effected more than 250 fraudulent and unauthorized disbursements from brokerage and advisory clients, allegedly using the misappropriated funds for personal expenses, such as purchasing automobiles and paying personal credit card bills.
The report alleges Rodriguez fabricated authorization for the transfers, engaging in "deceptive conduct" in an attempt to hide that he was misappropriating money from his customers.
When pressed by more observant investors who noticed peculiarities in their account, Rodriguez purportedly lied and made other false representations to conceal the misconduct, allegedly using loans and false assurances to try and assuage the concerns of his duped customers.
Instead of discharging Rodriguez, Morgan Stanley permitted the embattled broker to voluntarily resign while under investigation for allegedly using a client line of credit for his personal benefit, a less severe offense (at least to Morgan Stanley) than the $3.5 million fraud currently being pursued by the SEC.
FINRA barred Rodriguez shortly thereafter for refusing to cooperate with its regulatory investigation. 11 subsequent customer disputes filed against Rodriguez have culminated in over $4.7 million in settlements, paid by Morgan Stanley.
These subsequent settlements indicate that a broker's firm can indeed be held financially liable for fraud committed by a broker under their watch. FINRA and other securities regulators routinely impose penalties on firms for allowing unauthorized trading or other fraud due to poor or inadequate supervision.
For example, the Mississippi Securities Division reached a settlement with Morgan Stanley in 2016 for failing to adequately supervise another broker who engaged in misconduct, with the firm agreeing to pay $4.7 million in damages for a multi-state unauthorized trading scheme affecting customers in California, Arizona, and Washington on the West Coast.
If you invested with ex-Morgan Stanley broker Jesus Rodriguez or with any investment adviser or brokerage firm whose financial misconduct through unauthorized trading, churning, misappropriation, or fraud has resulted in losses or other damages, please call an experienced FINRA arbitration attorney at The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.