FINRA opened an investigation into Stephen Sloane, a Westpark Capital broker fired by Morgan Stanley in 2016 over allegations concerning cost-related issues in trading of US treasuries. FINRA's complaint alleges Sloane unsuitably recommended 14 retail customers engage in active, short-term trading of US Treasuries with 10- and 30-year maturities, resulting in hundreds of thousands of dollars in realized losses for customers, while Sloane himself pocketed an alleged $220,000 in profit.
According to Complaint #2016049414401, Stephen Sloane (CRD #1257601) executed 546 Treasury transactions in the customers' accounts, with more than 40% of the customers' sales of 10- and 30-year Treasury securities occurring within three months of purchase, and more than 75% of sales occurring within nine months of purchase.
To reiterate, the Treasury notes and bonds had maturities on the order of 10 to 30 years and, according to FINRA, Sloane recommended and traded the vast majority of those same Treasury securities within just nine months, purportedly resulting in $329,811 in total trading losses, exclusive of interest.
In other words, US Treasuries maturing in 10 or more years are intended as long-term investments, and in recommending an investment strategy to customers involving active, short-term trading of 10-year Treasury notes and 30-year Treasury bonds, customers were exposed to risks and harmful costs, including markups, markdowns, and fees.
FINRA alleges Sloane charged his customers a total of $510,025 in markups and markdowns, an amount described by Enforcement as "excessive and unfair."
The complaint states that Morgan Stanley fired Sloane when he ignored the firm's instruction to reduce his treasury-trading costs, and instead continued charging high markups, downs, and fees.
FINRA concluded by accusing Sloane of executing his active Treasury-trading strategy "for his own benefit and without regard to the negative impact on his customers of the cumulative costs generated by his frequent trading."
If you have invested with Westpark Capital/former Morgan Stanley broker Stephen Sloane or with any financial adviser or representative who unsuitably recommended you frequently short-term trade a product designed to be held long-term, such as a US Treasury note maturing in 10 years or a Treasury bond with a 30-year maturity date, and such premature trading has proven harmful to your investments or interests through excessive markups, charges, or fees, 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.