FINRA permanently barred Kim Dee Isaacson (Morgan Stanley of Salt Lake City and Ameriprise Financial of Midvale, Utah) from the securities industry after finding that Isaacson engaged in fraudulent misrepresentations, omissions, and attempted to negotiate a settlement with an elderly customer in private so as to conceal the fraud. The order also refers to a product called "Petrobras" as well as a slew of mutual funds which Isaacson purportedly purchased and held even after receiving explicit instruction from the client to sell.
OHO Settlement Order #2014040199101
The decision to bar Isaacson (CRD #855618) follows a June complaint charging Isaacson with the aforementioned misconduct. At the time, FINRA wrote that Isaacson earned nearly $400,000 in commissions and advisory fees from the elderly customer's accounts worth approximately $27 million during the relevant period in which Isaacson committed the fraudulent misconduct.
In 2016, investor and spy author H. Keith Melton won a $3.6 million award against Isaacson's former firm, Morgan Stanley, after arbitrators found that Morgan Stanley failed to supervise Isaacson, who in turn lied to Melton about his account balances. The award included both fee disgorgement, as well as damages for account losses.
The findings state that the now-71-year-old client, called "HM" in the OHO's report, preferred a "conservative-to-moderate" risk strategy with 20-year investment horizon, and that Isaacson devised an asset allocation plan, reassuring the senior investor that the deployed strategy was long-term and performing as expected.
Isaacson then effected 360 purchases and sales of securities including equities, bonds, unit investment trusts (UITs), futures, variable annuities (VAs), and mutual funds—without HM's authorization or consent.
When the elderly investor's accounts incurred a loss of $445,000 shortly after the inception of the allocation plan, Isaacson allegedly began providing HM with false and inflated account values during phone conversations in order to those losses.
The order states that part of Isaacson's unauthorized transactions involved purchasing shares in Brazilian "Petrobras," a product HM specifically told Isaacson he did not want to invest in, and a product HM explicitly instructed Isaacson to sell off after discovering that Isaacson had purchased 2,697 Petrobras shares. (In 2015, the New York Times penned an article entitled, "Petrobras Oil Scandal Leaves Brazilians Lamenting a Lost Dream" in which the Times talked of Petrobras' "culture of corruption.")
Although Isaacson purportedly assured HM that the Petrobras shares had been sold, they weren't, resulting in HM holding 16,000 shares of Petrobras in one of his discretionary accounts over two years after HM first instructed Isaacson to sell the original 2,697 Petrobras shares.
The report indicates a similar story for bond positions with a maturity of more than three years: HM apparently instructed Isaacson to sell such products, and Isaacson nonetheless continued to purchase such bonds with 3+ year maturity (much less failing to sell the ones presently held).
After HM began to unravel the full extent of the fraud, Isaacson allegedly attempted to settle the elderly customer's complaint away from the firm by offering to pay HM $100,000 a year until the damages—estimated by HM to be $3.1 million (see the $3.6 million arbitration award, above)—were repaid.
Morgan Stanley Wealth Management permitted Isaacson to resign following allegations that the representative verbally provided a client inaccurate information about an account's performance.
If you have invested with former Morgan Stanley/Ameriprise Financial broker Kim Dee Isaacson of Utah or with any representative or financial adviser whose fraudulent misrepresentations—including fabrication of account statements or other misinformation or omissions—or unauthorized transactions in your accounts in contravention of instructions and attempts to settle a dispute away from the firm have proven harmful to your investments or interests due to excessive commissions/fees or account losses, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.