Outside FINRA offices in New York. (Photo: Ronald Pechtimaldjian/ALM)
The Financial Industry Regulatory Authority suspended a former Morgan Stanley broker for three months over a series of unsuitable investment transactions, including 28 municipal bonds, that were made by him in eight of his customers' accounts in violation of FINRA rules, according to the regulator.
John A. Borsellino signed a letter of acceptance, waiver and consent on Oct. 25 in which, without admitting or denying FINRA's findings, he agreed to the suspension, to pay a $5,000 fine and to disgorge commissions he made from the 43 unsuitable purchases in the amount of $23,931, plus interest. FINRA accepted the letter Wednesday.
Morgan Stanley declined to comment Thursday. Borsellino's attorney, Marc Dobin of Dobin Law Group in Jupiter, Florida, didn't immediately respond to a request for comment.
The broker recommended that the eight clients buy 28 muni bonds and 15 non-municipal securities in their brokerage accounts, which "caused the customers to incur upfront sales charges," according to the FINRA letter. In each instance, Borsellino transferred the security to the customer's existing fee-based account shortly after buying it despite the fact that, in each case, he could have bought the security in the fee-based account without any upfront sales charges, the letter said.
The upfront sales charges associated with the 43 unsuitable purchases made in the customers' brokerage accounts totaled about $58,000, all of which Morgan Stanley went on to reimburse to Borsellino's clients, FINRA said.
The transactions were made by Borsellino despite the fact that he "lacked a reasonable basis to believe that the recommended securities purchases made in the customers' brokerage accounts were suitable because he failed to exercise reasonable diligence and failed to consider the costs associated with the transactions," according to FINRA.
