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 user 2009-12-21 at 10:05:56 am Views: 74
  • #23314

    NEW YORK- A second broker has agreed to Financial Industry Regulatory Authority disbarment in a case that cost Morgan Stanley  (MS) $7.2 million in fines and restitution for failing to adequately supervise registered representatives in its Rochester office.

    David Michael Isabella allegedly misled dozens of former Xerox Corp. (XRX) employees by promising them unrealistic and unsustainable returns, according to a settlement agreement between the former broker and Finra that was released on Monday.In March, Morgan Stanley agreed to pay $7.2 million in fines and restitution to 90 Rochester, N.Y.-area retirees to resolve charges that its supervisory system failed in regard to Isabella and another broker, Michael J. Kazacos, in its Rochester office. Morgan Stanley had previously settled with 101 other customers, and Kazacos previously had agreed to disbarment from the securities industry.

    On Monday, Finra released a disciplinary finding that said Isabella also had agreed to disbarment for his inappropriate solicitation and mishandling of IRA rollover/retirement accounts. Isabella did not admit or deny Finra’s findings but consented to them in an agreement signed on Sept. 1, 2009 and released on Monday.

    “Mr. Isabella was dismissed by Morgan Stanley and is no longer employed by the firm,” said Christine Pollak, a spokeswoman for the company. “The conduct at issue took place over five years ago. Morgan Stanley cooperated with the authorities and with affected clients to resolve their claims. We deeply value our relationship with our clients in the Rochester area and look forward to continuing to serve them in the future.”

    According to the Finra agreement, Isabella–a former Xerox employee–received confidential information about other Xerox employees from the company’s human resources and other departments in exchange for gifts that included phone cards, gifts and tickets to sporting events.The report also said that in his sales pitch, Isabella frequently provided prospective customers with a “Plan Summary,” promising rates of return of 10% or more. “Indeed, many of these summaries represented that the customers would be multi-millionaires at the end of a 35-year period,” said the report. Some of the clients decided to retire from Xerox based on those projected returns.

    Once clients agreed to open an account, Isabella typically used the same investments “without regard to individual needs or circumstances,” according to the report. Finra also found that Isabella “made unsuitable investment recommendations to the customers” and falsified client records at Morgan Stanley, which distorted their financial situation and goals. As a result, they did not receive the “benefit of getting a manager selected based on the their individual needs and financial situations.”Isabella was not available for comment. His attorney, Andrew W. Sidman of Bressler, Amery & Ross, said: “Dave Isabella at the time he left the industry had many satisfied and loyal customers. He is very pleased to put the issue behind him and to move on.”