Last week, the Financial Industry Regulatory Authority (FINRA) ordered Morgan Stanley Smith Barney, LLC pay two of its former clients a total of $4.2 million. Former Morgan Stanley broker, Aaron Parthemer (CRD#: 2546369), invested client money in a now-defunct Miami nightclub business. FINRA’s decision found Morgan Stanley failed to properly supervise the outside business activities of the former broker.
FINRA ordered Morgan Stanley, pay $3.3 million to lottery winner James Groves and $879,000 to James Asante Samuel, a former NFL cornerback. Both men were former clients of Parthemer while he was a broker with Morgan Stanley from 2009-2011. At their broker’s suggestion, they invested in the “Club Play” nightclub business. The club closed in 2014.
The men were two of six parties to file a 2016 arbitration claim against Morgan Stanley and Wells Fargo. The claim sought a total of $7.8 million in damages for both banks’ failure to properly supervise Parthemer. The former broker was with Morgan Stanley from 2009-2011 and Wells Fargo Advisors LLC from 2011-2015. He was indefinitely barred by the SEC in 2015.
Parthemer has had his share of shady dealings in the past. The SEC fined him in 2017 for violating sections of the Exchange Act and Advisers Act. Another FINRA filing states, that between 2009 and 2013, the former broker:
- engaged in outside business activities,
- loaned almost $400,000 to his customers,
- performed undisclosed private securities transaction in which his clients invested more than $3 million,
- and provided false documents to banks and FINRA.
In 2017, Wells Fargo settled with claimants for disputes related to Parthemer’s activities during his time as a broker with the company. In all, the two banks have reportedly paid more than $7 million to Parthermer’s former clients, which include about 40 professional athletes.
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