By Kenneth Corbin

Regulators have barred a former Morgan Stanley financial advisor from the brokerage industry for allegedly collecting improper payments through a client's investments in new offerings of company shares.

Joseph Eisler allegedly helped a client invest in newly issued shares, which companies can offer in initial public offerings or subsequent offerings, and received a kickback from the sale of those shares in a secret profit-sharing arrangement prohibited both by Morgan Stanley's policies and by Finra, the brokerage industry's self-regulator.

Finra alleges that Eisler's client agreed to pay the broker a portion of the profits from the sales of newly issued stock through "additional, unearned commissions in subsequent, unrelated transactions," according to Finra's letter detailing the settlement.

Eisler resigned from Morgan Stanley in December 2022 after the firm had placed him on administrative leave pending an investigation into the alleged kickbacks and Eisler's potential use of his personal device to conduct business over text.

Eisler accepted the ban without admitting or denying wrongdoing. His lawyer, Matthew Plant, didn't immediately respond to a request for comment.

Morgan Stanley declined to comment.

Eisler entered the brokerage industry in 1995 and joined Morgan Stanley in 2009. Finra alleges that the kickback scheme involving the shared profits from the sale of newly issued shares ran from August 2014 to June 2022.

Finra's Rule 5131 explicitly addresses the potential for brokers trying to generate revenue through quid pro quo agreements relating to newly issued shares. That rule states that no broker "may offer or threaten to withhold shares it allocates of a new issue as consideration or inducement for the receipt of compensation that is excessive in relation to the services provided by the member."

Finra has also issued guidance clarifying that Rule 5131 prohibits brokers from using new issues of stock as a means of "obtaining a kickback from the recipient."

Eisler's alleged conduct also ran afoul of another Finra rule, according to the regulator. This rule bars brokers from sharing in the profits or losses of their clients unless they had previously obtained permission from both their firm and the client, and that the revenue split was commensurate with the broker's investment.

Morgan Stanley's rules explicitly barred the type of profit-sharing arrangement involving new issues of stock that Eisler allegedly engaged in.

"Eisler never disclosed the profit-sharing agreement to Morgan Stanley, nor did he obtain prior written authorization from the customer or the firm," Finra says.

In total, Eisler collected more than $120,000 from the client for the sale of more than 100 allocations of newly issued stock.

Write to advisor.editors@barrons.com

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April 16, 2025 15:46 ET (19:46 GMT)

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