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Investor Protection

My Broker Only Did Me a Favor - Why Was He Suspended?

November 6, 2019

by Howard Haykin



As a Morgan Stanley customer, you signed up for a Portfolio Loan Account (“PLA”) - a loan or line of credit that’s secured by assets in your brokerage account. Each time you want to obtain funds from the PLA, you’re supposed to submit a signed Disbursement Request Form.



CONVENIENCE VS. REQUIREMENTS.  You told your broker you didn’t want to be bothered with signing the Disbursement Request Form each and every time you needed funds. So he accommodated you by having you sign a blank ‘Master’ form.


For the 60 or so occasions when you needed funds, your broker filled in the details on a copy of the pre-signed ‘Master’ Disbursement Request and submitted it for processing. And each request for funds was fulfilled - until one day it wasn't!


While nothing happened to the customer, the broker was punished for violating firm policies and procedures, as well as securities rules and regulations. He resigned from Morgan Stanley, fined $10,000, and suspended 2 months.



SAFEGUARDS ARE IN PLACE TO PROTECT CUSTOMERS.    'A chain is only as strong as its weakest link' - which explains why the broker in this case was severely sanctioned. And it provides a good explanation for why customers should not ask their brokers to intentionally break the rules - particularly when it simply a matter of one's convenience. Instead, try and seek out workable alternatives - within the rules.