Two Ex-Morgan Brokers Win In Arbitration

Morgan Stanley recently lost two arbitration cases with former brokers, resulting in million-dollar awards for the disgruntled reps. The arbitration panels found Morgan Stanley to have wrongfully terminated the brokers in both cases. One of the cases was actually initiated by the firm. Morgan fired, then sued, Oscar Marcote, a large producer at a Miami branch, for his forgivable loan of $385,000.

Morgan Stanley recently lost two arbitration cases with former brokers, resulting in million-dollar awards for the disgruntled reps. The arbitration panels found Morgan Stanley to have wrongfully terminated the brokers in both cases.

One of the cases was actually initiated by the firm. Morgan fired, then sued, Oscar Marcote, a large producer at a Miami branch, for his forgivable loan of $385,000. Marcote, in turn, counter-sued the firm for defamation and wrongful termination. The panel found the grounds for firing Marcote unjustified, awarded him a total of $1,905,730 in damages and forgave the loan.

In the other case, Philip Rosensweig, also of Miami, was fired May 28, 1999 for “Two customer complaints and a difference in investment philosophy,” according to his attorney, Curtis Carlson, a partner in Payton & Carlson in Miami. “This is a guy who was a $900,000 producer.” Morgan Stanley indicated on Rosensweig's U-5 (the uniform termination notice) that he had been “terminated for cause.” Since the firm maintains that a broker fired for any reason loses all deferred compensation funds, Morgan insisted Rosensweig was not entitled to the approximately $400,000 in his capital appreciation plan. (Morgan brokers must contribute 6 percent of commissions to this deferred compensation plan — money that is promptly converted into Morgan stock that cannot be redeemed for at least 5 years).

Carlson says Rosensweig was forced to forfeit his clients, which the firm then began contacting for business. With a U-5 showing he'd been fired with cause, the rep claimed that he was denied re-licensing from the state of Florida and remained unemployed until he was he able to find a job with independent firm Cantella & Co.

As an independent, Rosensweig made less than $60,000 in net income in each of the last two years, a fraction of his compensation at Morgan Stanley.

The arbitration panel found Morgan Stanley liable for wrongful termination. Consequently, it not only awarded Rosensweig $1,649,860 to cover financial damages for missed business opportunity and his deferred compensation, but also a clean CRD stating that he was terminated without cause.

A Morgan Stanley spokeswoman said the firm disagrees with the decisions and has filed for appeal in both cases.

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