Former Morgan Stanley Broker Sanctioned for Robbing Accounts of Minor Malpractice Victims

By Aaron Poehler

Published on November 18, 2008

New York Stock Exchange regulators today banned stockbroker Charles Winitch from working for member firms for a period of five years after he pocketed over $100,000 making unauthorized trades using the accounts of injured children.

NYSE regulators ruled that ex-Morgan Stanley broker Winitch and colleague John Steigerwald made dozens of unsuitable trades in guardian accounts which had been established for children that had received settlements from medical malpractice lawsuits. Regulators stated that Winitch and Steigerwald apparently targeted the children's accounts because the firm's customers were less likely to notice the unauthorized trading; several of the malpractice victims reportedly have single, unemployed mothers with little or no investment experience.

The unauthorized transactions generated over $537,000 in commissions for Morgan Stanley from 2004 to 2005, of which Winitch and Steigerwald personally received nearly $200,000. NYSE regulators permanently barred Steigerwald last year.

In a statement, Morgan Stanley spokesmen said the firm had reimbursed all clients whose accounts were affected by the trading scam and that remedial measures had been put in place to prevent a recurrence. Last year Morgan Stanley paid $500,000 to settle NYSE claims that the firm failed to diligently supervise the affected accounts, without admitting or denying wrongdoing.

 

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