Suspended Ex-Morgan Stanley Broker Seeks To Overturn $28k Award

A suspended ex-Morgan Stanley broker who lost a $65 million claim against the firm and was instead ordered by arbitrators to pay $28,400 to his former employer is not going gently into the night. 

Todd Kalish, a 25-year industry veteran, who had been terminated by Morgan Stanley in 2017, filed a motion in federal court seeking to vacate the arbitration award, which ordered him to return the money he owed from overpayments tied to “administrative errors.” 

Kalish is staking his claim in part on the grounds that Financial Industry Regulatory Authority arbitrators had “imperfectly executed” that award in May by not signing it with a wet signature or e-signature tool and instead merely typed the names into the signature box in italics.

The argument is a long-shot, particularly given judges are extremely deferential to arbitrator decisions, outside lawyers said. This form of e-signature is also the routine format for finalizing awards in Finra’s forum. 

“Sometimes it’s actually physically signed by the arbitrators; other times their names are typed in,” said Thomas Lewis, a New Jersey-based lawyer who frequently represents brokers. “A federal court that’s looking at this issue is going to say to the claimant, ‘You’re arguing form over substance here. Substantively, these arbitrators entered an award against you, and this is what the award is.’”

Kalish, who until his suspension had been registered as a broker with McDonald Partners, and as an investment advisor with Park Edge Advisors, both based in Cleveland, Ohio, declined to comment, according to his lawyer, Jason Archinaco. 

The motion to vacate may also be a hail mary attempt to keep his brokerage practice alive as he has argued that it should automatically stay his suspension for failing to comply with the award, according to Kalish’s brief.

Kalish, who filed the motion in an Ohio federal court, had worked at Morgan Stanley for nine years, when his termination happened. The firm described the termination reason as “other” and said on his U5 termination form that there were, “concerns relating to documentation for a personal loan account” for Kalish and his spouse. 

In a complaint that Kalish filed in 2019 with Finra against Morgan Stanley, he had alleged that he had been managing $400 million in client assets at the time of his termination, and that the firm had misrepresented on his U5 a dispute between him and his ex-wife during their divorce about a loan made from their joint account and defamed him—all part of attempts to make it more difficult for him to move his clients’ accounts to his new employer. 

As a result of Morgan Stanley’s actions, Kalish alleged he had only been able to move over $80 million in client assets, his Finra complaint alleged. He sought between roughly $32 million and $65 million in compensatory and punitive damages, according to the award.

Morgan Stanley denied the allegations and counterclaimed seeking the $28,397 in damages plus court costs, attorney fees and interests. In a May 12 issued award, three concurring arbitrators—two public and one non public—denied Kalish’s claims and his request for expungement of his U5, and awarded Morgan Stanley its counterclaimed damages to the penny but not the additional court costs, attorney fees and interests. The arbitrators split between Kalish and the firm responsibilities for the $47,550 costs for 36 hearing sessions the dispute required.

In June this year, Finra suspended Kalish indefinitely because he had “failed to comply with an arbitration award or settlement agreement or to satisfactorily respond to a FINRA request to provide information concerning the status of compliance,” according to his BrokerCheck record.

Prior to filing his motion to vacate, Kalish’s lawyers sought to have Finra produce an ink-signed copy of the award, and after failing that, tried to have a Finra case manager stay his suspension, according to his motion to vacate. But a Finra case manager postponed a final hearing on that issue so it was scheduled to occur after the deadline for Kalish to file his motion to vacate, according to the motion.

A Morgan Stanley spokesperson declined to comment.

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