- March 14, 2021
- Morgan Stanley
Henry Chang (CRD#: 4049732) was a previously registered Investment Advisor at Morgan Stanley in Pasadena, CA. He entered the securities industry in 1999 and previously worked for Citigroup Global Markets, Inc.; Citicorp Investment Services; WM Financial Services, Inc.; Gateway Investment Services, Inc.; and Pruco Securities Corporation.
According to publicly available records released by the Financial Industry Regulatory Authority (FINRA), in January 2021, Henry Chang was permitted to voluntarily resign from Morgan Stanley Smith Barney, LLC. The FINRA disclosure alleges, “Allegations about whether the representative was involved in soliciting outside investments and/or in outside activities.”
The Financial Industry Regulatory Authority (FINRA) strictly prohibits financial advisors from “selling away” or selling securities and investments to clients that are not offered by the brokerage firm with which they are employed. For example, it is illegal and a violation of industry rules for a financial advisor to recommend or even suggest that a client invest in the financial advisor’s own business or a business operated by his or her friends or family. It is not necessary that the financial advisor earn any compensation for recommending an outside investment.
The purpose behind this prohibition is to ensure that a financial advisor only offers to sell securities that have been vetted by his or her employer brokerage firm through a rigorous due diligence process. Most brokerage firms have an approved list of investments, products, and research that can be provided or made available to clients. Any deviation by the financial advisor from the approved product list may constitute selling away.
In addition, Henry Chang has been the subject of four customer complaints, including two that remain pending, including the following:
● January 2021 “Plaintiff alleges, inter alia, selling away with respect to outside investments – April 2018 – January 2021.” The customer dispute remains pending.
● October 2020 “PLAINTIFF ALLEGES SELLING AWAY WITH RESPECT TO CERTAIN INVESTMENTS – JAN 2018 – OCT 2020.” The customer dispute remains pending.
● April 2019 “Clients allege unauthorized trading, inter alia, September 2016 – October 2017. Damages unspecified.” The customer dispute was denied.
● March 2008 “COMPLAINT ABOUT AUCTION RATE SECURITIES THAT ALLEGED MISREPRESENTATION. DAMAGES UNSPECIFIED.” The customer dispute was settled for $75,058.
For a copy of Henry Chang’s FINRA BrokerCheck, click here.
Financial advisors have a legal and regulatory obligation to recommend only suitable investments that are appropriate for their clients’ needs and objectives. Their employing brokerage firm has a legal and regulatory obligation to supervise the Financial Advisors’ sales practices and dealings with clients. To the extent any of these duties are breached, the customer may be entitled to a recovery of his or her investment losses.
FINRA has defined the standards in which investment recommendations made by brokerage firms and registered financial advisors are evaluated. The FINRA suitability rule focuses on three fundamental concepts: (1) reasonable basis suitability, (2) quantitative suitability, and (3) customer-specific suitability.
● Reasonable basis suitability requires that a recommended investment or investment strategy be suitable or appropriate for at least some investors. Reasonable basis suitability requires an advisor to conduct adequate due diligence so that he or she can determine the risks and rewards of the investment or investment strategy.
● Quantitative suitability requires a brokerage firm or financial advisor with actual or de facto control over a customer’s account to have a reasonable basis for believing that a series of recommended transactions – even if suitable when viewed in isolation – is not excessive and unsuitable for the customer when taken together in light of the customer’s investment profile. No single test defines excessive activity, but factors such as the turnover rate, the cost-equity ratio, and the use of in-and-out trading in a customer’s account may provide a basis for a finding that a member or associated person has violated the quantitative suitability obligation.
● Customer-specific suitability requires that a member or associated person have a reasonable basis to believe that the recommendation is suitable for a particular customer based on that customer’s investment profile. Among the criteria that a financial advisor must evaluate to satisfy his or her customer-specific suitability obligations include the investor’s age, other investments, financial situation and needs, tax status, and investment objectives. Other considerations include the customer’s time horizon, liquidity needs, risk tolerance, and any other information disclosed by the customer.
Failure by a financial advisor to adhere to these requirements is evidence of negligence or, worse, investment fraud. If you as the investor can establish, at a minimum, negligent misconduct, you may be entitled to recover your investment losses.
The Wolper Law Firm represents investors nationwide in securities litigation and arbitration on a contingency fee basis. Matt Wolper, the Managing Principal of the Wolper Law Firm, is a trial lawyer who has handled hundreds of securities cases during his career involving a wide range of products, strategies and securities. Prior to representing investors, he was a partner with a national law firm, where he represented some of the largest banks and brokerage firms in the world in securities matters. We can be reached at 800.931.8452 or by email at email@example.com.