Wall Street regulators investigating Erzinger case
February 24, 2011
EDWARDS, Colorado – Wall Street’s self-policing organization is investigating whether Morgan Stanley violated securities laws by failing to report that one of its brokers faced felony charges stemming from a hit-and-run last summer.
Martin Erzinger was driving his new black Mercedes east on Highway 6 near Arrowhead at 1:40 p.m. last July 3, when he says he lost consciousness and ran over Dr. Steven Milo, who was bicycling along the shoulder. Erzinger drove away, leaving Milo on the roadside.
Erzinger was later diagnosed with sleep apnea, which he says caused him to black out at the wheel and run over Milo. He told police he didn’t remember hitting anyone.
Erzinger, who handles wealthy clients for Morgan Stanley, was originally charged with a felony, and later pleaded guilty to two misdemeanors in December.
Milo and his attorney, Harold Haddon, argued that Morgan Stanley Smith Barney was required to report the felony charges to regulators within 30 days of being filed. Morgan Stanley took months to report the incident, Haddon has said.
The Financial Industry Regulatory Authority will determine whether Morgan Stanley violated securities regulations by failing to report Erzinger’s charges within the required 30-day frame.
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“FINRA is investigating the matter,” said Nancy Condon, a spokeswoman for FINRA told the New York Times. “There are serious questions about whether the reporting obligations were met.”
Morgan Stanley Smith Barney says it released Erzinger’s court documents as soon as they became available, and that the felony charge was reported “an accurate and timely manner,” Jim Wiggins, a Morgan Stanley spokesman told the Times.
Not true, says Harold Haddon, Milo’s attorney.
“What Dr. Milo was looking for and complained about since August was that Erzinger and Morgan Stanley did not file any disclosure,” Haddon said. “They didn’t file anything until the hearing in mid-December, Haddon said. They’re required to file notice within 30 days.”
After the December hearing, Erzinger filed a FINRA report that Haddon said was incomplete. Milo objected and the judge ordered him to submit a full report, Haddon said.
“After that, Morgan Stanley took notice of what had and had not been filed and they filed a complete disclosure in mid-January,” Haddon said.
In Milo’s latest filing, he asserts that Erzinger’s filing violates his probation. Erzinger worked in a Haitian orphanage to serve his community service sentence.
“It makes Dr. Milo even angrier to have to push and push and push to get the complete filing that should have been submitted a month after the collision,” Haddon said.
Milo works with the Mount Sinai Medical Center organ transplant team. He’s working off and on, when he can, but is sometimes knocked down for days at a time by debilitating spinal headaches, Haddon said.
“He was an All-American baseball player at Johns Hopkins and a good all-around athlete,” Haddon said. “It’s difficult for him to be unable to run or bike, swim or ski.”
FINRA could fine Morgan Stanley, and it wouldn’t be the first time.
In 2004, FINRA leveled a $2.2 million fine against Morgan Stanley, saying the first failed to report 1,800 incidents of wrongdoing and customer complaints, the Times reported.
FINRA is a nongovernmental regulator that works with federal agencies like the Securities and Exchange Commission to oversee Wall Street. FINRA’s database goes back three decades and investors use it to check on financial professionals.
Wall Street finances FINRA, and Wall Street firms are supposed to supply that information, but sometimes they don’t.
A FINRA sweep in 2004 nailed almost 30 securities firms for failing to disclose customer complaints and criminal convictions. The fines topped $9 million, the New York Times reported.