A 77-year-old retiree has petitioned a California courtroom to compel Morgan Stanley and a San Diego-based advisor to arbitrate claims that an choices technique price him shares in two know-how corporations that may be value roughly $5 million and triggered a considerable tax invoice.
Michael Massery alleged that Morgan Stanley and Nicholas S. Westendorf positioned him right into a discretionary covered-call technique regardless that he needed to protect his holdings. The technique generated greater than $55,000 in commissions whereas in the end costing Massery his shares and leaving him with a $365,000 tax invoice in 2024, in keeping with the petition.
“The shares have been gone. The tax was not,” the lawsuit, which was filed on Thursday, said.
Massery accused the agency of elder abuse, breach of fiduciary responsibility and negligence.
When Massery employed Morgan Stanley in 2020, he sought a technique that “would shield his shares, let him hold them long run, and generate roughly $20,000 a 12 months in further earnings,” in keeping with the lawsuit.
Massery agreed to the covered-call technique as a result of the agency “informed him his shares can be protected.” He alleged that he didn’t perceive the technique and communicated that repeatedly to agency personnel in writing “12 months after 12 months.”
For 4 years, as Massery’s know-how shares, together with Apple and NVIDIA, rose some 300%, Morgan Stanley rolled the choices “time and again” and “charged a price every time,” regardless of the retiree’s request “to get him out,” the lawsuit stated.
As early as November 2020, Massery informed Morgan Stanley: “I need the choices to be rolled or purchased again in order that I not have any positions.” He additionally wrote to the agency’s senior threat officer, the lawsuit stated.
As an alternative, every roll postponed the give up of his shares, saved them locked up and raised the price of getting out from $434,000 in March 2021 to round $1 million by December 2024, in keeping with the petition.
The petition additionally describes Massery’s exchanges with Anthony M. Gallea, a former Morgan Stanley managing director in North Carolina. In August 2022, Gallea responded to Massery’s inquiries by writing: “I’ve answered these questions from you so many occasions that I don’t assume going by means of it once more would allow you to,” in keeping with the lawsuit.
In the identical e mail Gallea acknowledged that Massery “appear[ed] to not perceive the technique” after two years and directed him to coach himself: “Would possibly I counsel you go to the Choices Trade Council web site,” in keeping with the lawsuit.
Gallea, whose compensation was tied to persevering with the technique, rejected a proposal to unwind the choices, in keeping with the lawsuit. The rolling continued till the Apple and NVIDIA shares have been surrendered, Massery alleged.
The petition didn’t identify Gallea as a defendant. The 44-year business veteran, who retired in 2025, based and led a 38-member workforce that labored with different Morgan Stanley brokers nationwide to advertise choices methods.
Gallea has one pending declare on his BrokerCheck report, looking for $429,000 over allegedly unsuitable investments in addition to three denied buyer claims.
In 2023, a panel of three public arbitrators for the Monetary Trade Regulatory Authority beneficial erasure of a settled grievance from Gallea’s report on the grounds that the shoppers’ allegations have been “clearly misguided.”
That grievance concerned coated calls in opposition to a $1.12 million place in United Parcel Service, Inc., which represented a minimum of 35% of the shoppers’ internet value, in keeping with the award. When the calls fell “within the cash” and have been exercised prematurely in November 2021, Gallea and members of his workforce prompt shopping for UPS shares within the open market to fulfill supply and subsequently keep away from promoting the shoppers’ shares. In that case, the shoppers had opted to forego reversal as suggested, the panel discovered.
Massery, who’s represented by The Reif Legislation Group in Beverly Hills, California, is looking for greater than $5 million in financial damages, compensation of tax liabilities created with the methods, non-economic damages for “psychological and emotional misery”, punitive damages, in addition to asking the courtroom to compel the wirehouse and advisor to arbitration.
“Mr. Massery gave the agency a four-word instruction: don’t lose my shares,” Brandon S. Reif, his legal professional, stated in a press release issued with a press launch concerning the lawsuit. “[H]e was put in a technique that surrenders the shares if the inventory retains climbing. In our view, calling that safety is like calling a lit fuse a security function.”
A Morgan Stanley spokesperson declined to remark concerning the litigation or present a remark from Westendorf.