Morgan Stanley Hit with $5 Million Securities Fraud Lawsuit Involving Alleged Superannual Account Losses Related to Risky Option Trading

In Australia, two Morgan Stanley (MS) customers are suing the financial firm for $5 million because they say that is much their superannual accounts lost because of alleged misrepresentations made by broker Kate Kearney. Helen Sedman, 74, and Sally Middleton, 61, claim that Kearney deceived them into thinking that an option trade that they made was low risk.

Middleton and Sedman are business partners. They believe that because of the high-risk option trade and fees they had to pay, over 97% of Middleton’s account was wiped out (from $1.2 million to $34,000), while Sedman’s went down 90% (from $4.8 million to $950,000) in just eight weeks. The plaintiffs say they paid Morgan Stanley $1.1 million in fees.

According to the women’s securities attorney, the business partners wanted long-term safe investments for their super funds. Instead, what they purportedly got was an “aggressive” trading plan that cost them close to $5 million, while Kearney earned $379,000 in commissions from Sedman and $188,000 from Middelton. Their lawyer says that because of Kearney’s reassurances, their lack of knowledge about how much risk was really involved, and their difficulty in fully comprehending their trading position, they ended up moving forward with trades that they otherwise would not have gotten involved in.

The two women believe that Kearney acted in her best interests rather than theirs. They are alleging breach of duty of care, breach of contractual obligations, and failure to stop the risky trading even though the risk management division had identified that it was taking place.

If you suspect that your financial losses are due to broker misconduct or negligence, you should speak with an experienced securities lawyer right away.

Morgan Stanley sued over $5m super losses, The Age.com, May 20, 2013

Fraud, Securities and Exchange Commission (PDF)


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