Ken Kavanagh of Hawley, Pennsylvania submitted a Letter of Acceptance, Waiver, and Consent (AWC) in which he was fined and suspended by the Financial Industry Regulatory Authority (FINRA), for allegedly engaging in private transactions and falsely answering compliance questionnaires in violation of NASD Rules 3030 and 2110 and FINRA Rules 3270 and 2010.
In April 2006, Ken Kavanagh was registered as a General Securities Representative with Morgan Stanley. According to FINRA, from October 2007 through March 2018 Kavanagh engaged in outside business activities without providing prior written notice to Morgan Stanley. The findings stated that Kavanagh managed the personal affairs of professional athletes, 40 of whom were clients of both Kavanagh and Morgan Stanley. The findings also stated that Kavanagh formed two entities to facilitate his activities and had separate bank accounts for the personal services he provided, generating $5 million. In addition, Kavanagh concealed his relationship with his two entities by naming a relative the sole owner and falsely attested on compliance questionnaires that he was not involved in any outside activities.
NASD Rule 3030 provided, in relevant part: “No person associated with a member in any registered capacity shall be employed by, or accept compensation from, any other person as a result of any business activity, other than a passive investment, outside the scope of his relationship with his employer firm, unless he has provided prompt written notice to the member. Such notice shall be in the form required by the member. Likewise, FINRA Rule 3270 provides, in relevant part: “No registered person may be an employee, independent contractor, sole proprietor, officer, director or partner of another person, or be compensated, or have the reasonable expectation of compensation, from any other person as a result of any business activity outside the scope of the relationship with his or her member firm, unless he or she has provided prior written notice to the member, in such form as specified by the member.”
Without admitting or denying FINRA’s findings, Ken Kavanagh was assessed a deferred fine of $25,000 and suspended from association with any FINRA member in all capacities for 18 months. The suspension is in effect from August 5, 2019, through February 4, 2021.
Stockbrokers have been known to engage in many practices that may violate industry and firm rules, practices, and procedures. In order to protect investors from stockbroker misconduct, FINRA rules require brokerage firms to establish and implement a supervisory system. The implementation of these industry rules requires supervisors to monitor their employees to ensure compliance with federal and state securities laws, securities industry rules and regulations, and the brokerage firm’s own policies and procedures. If broker-dealers and/or their supervisors fail to establish and implement these protective measures, they may be liable to investors for damages which flow from the broker’s misconduct. Therefore, investors who have suffered losses stemming from private transactions, and/or other misconduct by their broker can file claims to recover damages against broker-dealers, like Morgan Stanley, which should consistently oversee its brokers’ activities in order to prevent the above-described misconduct.
Have you suffered losses in your Morgan Stanley account due to private transactions by your broker? Was Ken Kavanagh your stockbroker? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce is accepting clients with valid claims against Morgan Stanley stockbrokers who may have engaged in broker misconduct and caused investors’ losses.
The most important of investors’ rights is the right to be informed! This Investors’ Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 40 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors’ rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at email@example.com for answers to any of your questions about this blog post and/or any related matter.