Morgan Stanley’s Lloyd Layton Fined For Unsuitable UIT Trading

Lloyd Thomas Layton (CRD #: 1618414) is a prior Morgan Stanley registered representative (2009 – 2015) who consented to Financial Industry Regulatory Authority (FINRA) fining him $5,000.00 and suspending him from having any association with a FINRA member firm in all capacities for three months according to Layton’s submission of Letter of Acceptance, Waiver and Consent #: 2017055691701, accepted by FINRA on August 13, 2018. FINRA held that Layton engaged in unsuitable trading in 54 Morgan Stanley customer accounts.

Specifically, the AWC stated that from July 2012 to December 2014, Layton engaged in the short-term trading of unit investment trusts (UITs). Those investments, as discussed in the AWC, are comprised of investment companies offering shares of a fixed securities portfolio in a public offering, and terminate on a maturity date specified in advance for investors. UITs, FINRA specified, generally contain hefty charges that are assessed to investors on an upfront basis, so the trading of UITs, especially on a short-term basis, is typically inappropriate.

From July 2012 to December 2014, Layton evidently made recommendations for customers to buy the UITS and subsequently sell the securities long before they matured. In fact, the findings revealed that most of the time, Layton recommended UITS containing 24-month maturities, and a customer would be assessed a sales charge of 1.95% up to 3.95% each time a UIT was purchased.

Despite the 24-month maturities, Layton supposedly made recommendations for customers to dispose of the UITs when those securities had only been held by customers for less than 12 months. The findings stated that customers held UITS for an average of 265 days before they were sold. Moreover, Layton evidently recommended in more than 60 occasions that customers take the proceeds from UIT sales and buy other UITS that were similar, if not identical, to those that customers sold before their maturities.

FINRA found that it was in no way suitable for customers to invest pursuant to Layton’s recommendations given the frequency and costs of the UIT transactions. Layton consented to FINRA’s findings of him violating NASD Rule 2310 and FINRA Rules 2111 and 2010 based on his unsuitable short-term UIT trading in Morgan Stanley customer accounts.

Morgan Stanley terminated Layton’s registration on March 26, 2015. He is currently employed with Wells Fargo Clearing Services, LLC in Washington, DC.

The Law Office of Peter M. Spett is experienced in representing investors in cases of unsuitable investment recommendations, fraud, negligence, and the failure of brokerage firms to supervise their financial advisors. If representatives such as Layton have traded in your account in an inappropriate manner, contact Peter M. Spett at (888) 217-4919 for a free consultation concerning the possible recovery of your investment losses.