FINRA Suspends Nikolay Zotenko (Morgan Stanley)

FINRA Suspends Nikolay Zotenko (Morgan Stanley) For “Exclusive Venture Capital Investment Opportunity” Investments

The Financial Industry Regulatory Authority (FINRA) has taken action against a former Morgan Stanley broker from Beverly Hills, California for misleadingly marketing a private placement on its platform. Nikolay Zotenko was a Morgan Stanley employee for five years before he was terminated in May 2021. He was also suspended and fined $10,000 because of the violations.

Between January 19, 2021 and February 3, 2021 Zotenko sent over 1,150 messages and emails to potential retail customers regarding a private placement that he called an “Exclusive Venture Capital Investment Opportunity.” The letter stated that the private placement was “typically closed for new investors.”

Zotenko also extolled the investment as a portfolio venture capital funds that invests in certain sectors. He claimed that it generated returns that “far exceeded industry average” and downplayed risks associated with what was a speculative type of investment.

The letter stated that “these communications violated content standards for member communications to the public because they contained misleading and unwarranted statements.” “[T]he communications were lacking balance and did not provide a solid basis for evaluating the private placement investment.”

Zotenko broke Finra rules regarding communications with retail clients. Zotenko also violated Finra’s catch-all Rule 2010, which requires “high standards commercial honor”. Zotenko circumvented Morgan Stanley’s internal controls by sending communications after the firm had denied approval.

Zotenko accepted the penalty but did not admit or deny Finra’s allegations. He said that he would not rejoin the industry, but declined to comment immediately. According to his LinkedIn profile, he has been working as the founder and CEO of UrDoc since February 2021. UrDoc is a startup that builds the “first financial history databank.”

Morgan Stanley spokesperson didn’t immediately respond to our request for comment.

According to Morgan Stanley’s U5 termination notice, he was fired because of “[c]oncerns about the representative sending email to many prospect clients with content about investment opportunities, after he had sought approval and not received it and took steps to prevent further review by the Firm.”

After sending over 600 emails via his firm account, Zotenko waited to get Morgan Stanley’s approval. However, the Finra letter stated that firm compliance officials denied Zotenko’s request. They claimed the message contained “several problems” and “impermissible promissory messages”.

Despite being denied, Zotenko evaded the firm’s supervision and sent approximately 550 more messages through Morgan Stanley’s internal systems over the next two days. Because he learned that the firm’s internal systems automatically rejected messages that were not approved and sent to more than 26 customers or prospects in a 30-day time period, he sent 25 messages at a stretch. Finra stated that he falsified each time that the messages were meant for 25 recipients.

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