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NASD Arbitration Panel Finds Morgan Stanley Liable and Orders Full Restitution

PR Newswire

BEVERLY HILLS, CALIFORNIA, November 18, 2004 /PRNewswire/ – The following was released today:

A National Association of Securities Dealers (NASD) arbitration panel found liable and ordered Morgan Stanley DW, Inc. (NYSE: MWD) to pay Joacy Silva a total of $452,034 for the company’s breach of fiduciary duty and failure to supervise registered representative Rick Schoen in its Beverly Hills, California office. The brokerage firm defended the case by claiming that the downturn in the markets caused the losses. However, the NASD panel rejected this argument and the award represents a return of all money lost plus attorneys fees. The panel also ordered Morgan Stanley to pay the costs of the hearing.

Ms. Silva sought the investment advice of Morgan Stanley in managing her investment portfolio. For approximately twenty-nine months while Ms. Silva resided out of the country, her broker Mr. Schoen made trades without contacting her. Morgan Stanley also concentrated her portfolio in speculative technology and telecom stocks on margin which were unsuitable based on her financial needs and station in life.

Joacy Silva was represented by Ryan Bakhtiari, a Beverly Hills, California based attorney that represents customers in securities arbitrations. According to Mr. Bakhtiari, who argued the case at the hearing: “Morgan Stanley knew of the speculative trading going on in Ms. Silva’s account but did nothing to properly supervise the broker. The failure to allocate any significant part of the assets in bonds and the heavy technology trading on margin decimated the portfolio.”

This award represents a finding of 100 percent responsibility on the part of Morgan Stanley. In making this award, the NASD panel sent a message of accountability to Morgan Stanley and ordered them to pay Ms. Silva every dollar that she lost plus attorneys fees.