FINRA suspended former Morgan Stanley broker Timothy Thomas Gibbons for unsuitable investment recommendations to five elderly and retired clients in their 70s, 80s, and 90s after Gibbons purportedly advised his customers to invest two-thirds to three-quarters of their funds in just one particular high-risk product.
FINRA charged Gibbons (CRD #219872) with overconcentrating the accounts by recommending that his elderly customers invest 65-to-79% of their account values in a single high-risk energy sector security, resulting in nearly $1 million in losses between the accounts.
While FINRA did not identify the security, our investigation revealed several energy companies which might be the mystery investments, Linn Energy Master Limited Parntership (NYSE: LINE), Cobalt International Energy Inc (CIE), Seadrill Partners LLC (SDLP), and Seadrill Limited (NYSE: SDRL), and Clearbridge Energy Master Limited Partnership (MLP) are a few energy sector securities associated with Morgan Stanley.
According to a 2015 SEC filing, Morgan Stanley held over 25 million Cobalt International Energy notes and common stock shares at that time, making CIE one of the firm's largest energy sector holdings. Morgan Stanley also recommended and held Cobalt International Energy in a global convertible bond fund, complete with a "you may potentially lose your entire investment in this fund" disclosure, according to Morningstar.com.
Morningstar also lists Morgan Stanley Smith Barney LLC as Seadrill Partners' third-most major shareholder institution, presently behind Columbia Management Company and Prescott Group Capital Management. As of June 2017, these three are the only institutions that each hold over one million Seadrill shares in their various portfolios. By contrast, in 2014, Morgan Stanley held nearly 15 million Seadrill Limited shares.
The 2015 SEC filing also indicated holdings in over nearly 10 million Clearbridge American Energy and Clearbridge Energy MLP positions.
In 2015, The New York Times reported that Morgan Stanley was "still trying to sell the debt" incurred by the firm when it headlined a collection of banks that loaned Vine Oil and Gas, an affiliate of Blackstone Energy Partners, $850 million.
Last year, we began investigating possible claims that former Morgan Stanley and current Wedbush Securities, Inc. broker William Mark Heiden of Newport Beach, California mismanaged client accounts by engaging in overconcentration in several energy stocks, including Arch Coal, Clearbridge American Energy MLP, Energy XXI Bermuda Ltd, Goldman Sachs MLP Energy, and Seadrill.
Heiden's BrokerCheck report indicates that prior to joining Wedbush in August 2013, he was associated with Morgan Stanley of Newport Beach from 2007 through August 2013, and that he reached settlements in excess of a combined $1.5 million for various customer disputes alleging wrongful conduct including breach of fiduciary duty, fraud by misrepresentation and omission, breach of contract and fiduciary duty, unauthorized trading, intentional fraudulent activities including unsuitable and unauthorized trading, and falsification of documents.
As for Gibbons, FINRA in its decision ordered restitution totaling $716,749.78, though the regulator readily admits that this figure only represents a partial amount of the $960,000 in collective realized and unrealized losses. An additional pending dispute in Gibbons' BrokerCheck report alleges investment in unsuitable stocks given the client's investment objectives.
If you have invested with ex-Morgan Stanley representative Timothy Thomas Gibbons or with any broker or financial adviser whose recommendation to purchase oil-and-gas or other risky energy sector securities, such as Master Limited Partnerships (MLPs), was unsuitable in light of your investment objectives or risk tolerance preference, or who has purchased such products at such great levels as to overconcentrate the positions in your portfolio, and this unsuitable overconcentration has 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.