FINRA charged former Morgan Stanley and present Ameriprise Financial broker Kim Dee Isaacson with making fraudulent misrepresentations and omissions of material facts to an elderly client regarding securities transactions and associated losses in the customer's account. The Department of Enforcement additionally alleged that Isaacson engaged in unauthorized trading and attempted to settle a customer complaint away from and without the knowledge of Morgan Stanley.
The Enforcement complaint follows a 2016 arbitration panel's decision to award $3.6 million to Isaacson's jilted client, finding that Morgan Stanley failed to supervise Isaacson and, therefore, was liable for Isaacson's (and the firm's) damages.
In its complaint, Enforcement alleged that Isaacson (CRD #855618) intentionally and repeatedly misrepresented the value of a now-71-year-old customer's accounts to be worth $3.1 million more than the their actual value. Isaacson purportedly made these misrepresentations in order to conceal losses in the accounts, as well as to hide that the accounts were not receiving the four-to-six percent return that Isaacson had promised.
Investigators wrote that Isaacson effected approximately 360 unauthorized transactions in the senior client's accounts, including multiple transactions in certain securities ("Petrobras") that Isaacson's customer had specifically prohibited Isaacson from purchasing. Enforcement wrote that Isaacson failed to discuss these trades with the elderly customer and effectively concealed the unauthorized trades by making additionally misrepresentations to the client.
When the client specifically instructed Isaacson to cease purchasing and to sell any existing Petrobras shares in his portfolio, Isaacson allegedly informed the customer that he had sold the Petrobras shares when, in fact, Isaacson never sold the Petrobras shares, and furthermore, continued purchasing new Petrobras shares after being instructed to sell the existing ones.
The complaint states that when Isaacson finally got around to selling the Petrobras shares several years later, he did so at a loss of approximately $187,000.
Finally, when the customer discovered the misconduct and attempted to file a dispute against Isaacson, Isaacson allegedly attempted to settle the complaint away from, and without the knowledge of, Morgan Stanley. Specifically, Isaacson purportedly tried to offer $2.6 million to the customer as restitution, and attempted to structure a way to make these payments to the tune of $100,000-per-year, all without notifying FINRA or Morgan Stanley of these proceedings.
FINRA found that, in all, Isaacson earned nearly $400,000 in commissions and advisory fees from the elderly customer's accounts, which comprise about 18.5% of all commissions Isaacson earned during the period of misconduct.
Enforcement wrote that the elderly customer's risk strategy was "conservative-to-moderate" with a 20-year investment horizon and four-to-six percent targeted rate of return.
In 2016, spy author and investor H. Keith Melton won a $3.6 million award against Morgan Stanley in arbitration after arbitrators found that Isaacson had lied to Melton about his account balances, additionally ruling that Morgan Stanley had failed to properly supervise Isaacson. Arbitrators had also ordered Morgan Stanley and Isaacson to pay costs of $28,800 for 24 hearings conducted in Florida.
After resigning from Morgan Stanley Wealth Management in 2014 in a disclosable event related to allegations that he provided a client inaccurate information about the client's account performance, Isaacson became associated with Ameriprise Financial Services in Midvale, Utah.
If you have invested with former Morgan Stanley and present Ameriprise Financial representative Kim Dee Isaacson, or with any broker or financial adviser whose fraudulent misrepresentations and omissions—such as misleading or false account statements or representations that your account is worth more or less than it actually is—or unauthorized trading activity has resulted in the accrual of excessive fees or has otherwise proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.