Advisor Chris Stocks was involved in the operation of a hotel for years without telling the wirehouse, according to a consent filing.
The Financial Industry Regulatory Authority has fined and suspended an ex-Morgan Stanley financial advisor accused of failing to disclose his ownership and operation of a hotel.
Between January 2017 and September 2020, advisor Chris Stocks, then with Morgan Stanley in Scottsdale, Arizona, "formed four business entities for the purpose of purchasing and operating the hotel," Finra asserted in a letter of acceptance, waiver and consent published this week. Through September 2020, Stocks "remained involved with the hotel's operations, including by making hiring decisions, interacting with the hotel's general manager, and participating in contract negotiations," Finra said in the consent filing, adding that Stocks expected to receive a share of the hotel's profits in exchange for his services.
Stocks didn't notify Morgan Stanley of his involvement with the hotel until September 2020, failing to report his involvement with the hotel as an outside business activity on annual compliance questionnaires, according to Finra.
Stocks was discharged by Morgan Stanley in November 2021, after logging a total of 26 years with the wirehouse and its Dean Witter predecessor, according to his BrokerCheck record.
In its Form U5 filing, the firm said Stocks was dismissed amid concerns regarding "participation and activities in an outside hotel investment in which clients of the Firm were also invested," per BrokerCheck. The firm added that it did not receive any client complaints related to the investments.
Finra says it commenced its investigation of the matter after reviewing the Form U5 disclosure. In the consent filing this week, the industry's self-regulator asserted that Stocks violated Finra rule 3270, which requires prior disclosure of all outside business activities for which compensation is received or expected, and Finra rule 2010, which requires Finra members to "observe high standards of commercial honor and just and equitable principles of trade."
Stocks this week accepted a 30-calendar-day suspension and agreed to pay a fine of $10,000 to resolve Finra's allegations, which he neither admitted nor denied.
Stocks' attorney, Matthew Plant, of New York-based Lax & Neville, did not respond to a request for comment, and a Morgan Stanley spokesperson declined to comment.
Stocks has been registered with Prospera Financial Services since January 2022, per BrokerCheck, and launched his own practice, Paradise Valley, Arizona-based Stocks Wealth Management the same year.
His BrokerCheck record lists eight outside business activities; all but one located at the Paradise Valley residence from which he operates Stocks Wealth Management. The outside businesses include Edge Hospitality, which pays hotel employees, Scott said in disclosing the entity; as well as Den 8888 LLC, which is involved in "overseeing and making large expenditure in the hotel division," per the same disclosure; as well as CG Auto Sales and CStocks Motorsports.