Morgan Stanley Smith Barney FA Notes Holding Holdings LLC (MSSBFAN), a subsidiary of Morgan Stanley & Co., Inc., and an affiliate of Morgan Stanley Smith Barney LLC (MSSB) and Morgan Stanley Smith Barney Financing LLC (MSSBF) (collectively, Morgan Stanley) offered promissory note loans to employees and prospective employees as an inducement to recruit and retain financial advisor employees in the States of California and Nevada.
RLG is investigating claims on behalf of employees and ex-employees of Morgan Stanley who reside, or previously resided, in the States of California or Nevada and who had promissory note loans paid, unpaid, or in dispute with Morgan Stanley from approximately 2014 to the present. For a no-charge, no-obligation consultation, please contact us today to learn about your rights and legal options. You may be entitled to compensation, including but not limited to, forgiveness of the principal, waiver of the interest, and waiver of the attorneys’ fees and costs.
Background Information
Morgan Stanley lured financial advisors to work for the company as financial advisors by offering the recruits and employees lucrative promissory note loans for personal use. Because the loan amounts were significant and had multi-year payoff terms, it would take employees years to repay the promissory note loans plus interest charges. Employees who reached annual performance targets received bonuses to repay the promissory notes, described in the securities industry sometimes as forgivable promissory notes.
RLG is investigating allegations that Morgan Stanley through MSSBFAN unlawfully engaged in the business of originating, servicing, and collecting promissory note loans without valid licensing and licensure to originate, service, and collect on the loans in California and Nevada because MSSBFAN:
- Never held valid licenses to originate, service, and collect on promissory note loans from California and Nevada lending regulators
- Never held valid certificates to conduct any business activities from the Secretaries of State for California and Nevada
RLG’s investigation allegations rely, in part, on the fact that MSSBFAN entered into a Consent Order with the California Department of Financial Protection and Innovation in October 2020 stipulating to findings of fact that: (a) it engaged in the business as a finance lending without licensure from at least 2009 through October 23, 2019; (b) it made loans to Morgan Stanley employees as part of a comprehensive employee benefits program primarily in order to recruit and retain those employees; and (c) it did not hold a license to make loans under the Cal. Financing Law and was not otherwise exempt from the California Financing Law.
In or about 2020, Morgan Stanley dissolved MSSBFAN and transferred its assets to MSSBF and assigned its rights to MSSBF and MSSB. But before taking these acts, Morgan Stanley did not take steps to properly license MSSBFAN.
RLG’s investigation is focused on the claim that MSSBFAN was never registered to conduct business in California or Nevada and that MSSBFAN was never licensed to originate, service, and collect loans in California or Nevada.
RLG’s investigation alleges that Morgan Stanley failed to disclose to the affected employees and ex-employees its unlawful and unlicensed business practices for the promissory note loans.
RLG’s investigation also alleges that Morgan Stanley pursued aggressive collection practices against ex-employees upon separation that included accelerating the loans for immediate payment upon separation, charging higher interest rates upon separation, and pursuing attorneys’ fees and costs to enforce the promissory note loans upon separation.
RLG’s investigation also alleges that Morgan Stanley:
- Threatened to report delinquencies to consumer credit agencies to induce repayment upon separation to induce repayment
- Froze and sometimes segregated ex-employees’ investment portfolio assets after upon separation to induce repayment
- Sued for collection in the name of MSSB and MSSBF instead of in the name of MSSBFAN
- Did not produce in discovery the evidence to show that MSSBFAN engaged in unlawful and unlicensed business activities
Morgan Stanley Advisors and Ex-Advisors Who Received Promissory Note Loans May Have Claims
Reif Law Group, P.C. wants to hear from current and former employees of Morgan Stanley residing in California and Nevada to discuss their rights. RLG also wants to hear from current and former employees of Morgan Stanley residing in other states who have promissory note loan concerns. Contact us today to learn about your rights and legal options. You may be entitled to compensation, including but not limited to, forgiveness of the principal, waiver of the interest, and waiver of the attorneys’ fees and costs.
