Securities Industry Commentator by Bill Singer Esq

February 21, 2022

The BrokeAndBroker.com Blog published "Hot Shoe Burnin' Down Wall Street In FINRA Morgan Stanley Panama Arbitration," an article that was written solely by our publisher Bill Singer and published with a copyright notice. For the third time, someone or some company has submitted a Digital Millennium Copyright Act ("DMCA") notice claiming that Bill Singer's copyrighted article wasn't his exclusive copyrighted material. Inexplicably, Google has blocked the article. Understandably, Bill Singer, a 40-year-veteran-lawyer, isn't about to succumb to baseless threats. He has submitted contests to the DMCA notices citing his sole authorship and published copyright notice. In response to Google's takedown of the originally posted content, Bill deleted the content from the original URL and has now republished it at this new location, and he will continue to re-site the content so as long as it is subjected to improper DMCA takedowns. Bill, being the generous guy that he is, also has taken the time to update aspects of the original story and to more clearly mark his turf by noting repeated instances of his name and copyright throughout the updated version of the original article. Also, Bill has graciously allowed the "Securities Industry Commentator" to carry this content on its own site in addition to the companion BrokeAndBroker.com Blog site.

Who is behind the effort to remove the article? Who is behind the effort to silence Bill? Who is behind the effort to erase all online traces of this story? Bill has no idea and, frankly, doesn't give a damn. He will continue to republish this story in an effort to ensure that public investors are made aware of Wall Street's short-comings and that those seeking to cover up the truth never prevail.

= = = = =

Today's featured lawsuit involves a somewhat tortured fact pattern, which bends and twists its way through a political scandal, entangled financing for a hotel, a FINRA arbitration, and into federal court. Even after you've read the fact pattern a few times, you're still not quite sure who did what to whom. Frankly, you never feel like you've got a firm grasp on anything. By Bill Singer, Esq. / Copyright February 18, 2022.

Panama

Fundacion Nicor was a company controlled by Panamanian real-estate developer Nicolas Corcione Perez Balladares ("Corcione"). Unfortunately for Corcione, he found that he was under Panamian government investigation for alleged fraud. Apparently fearing that Panama would freeze his assets, Corcione was purportedly desperate to move his wealth outside of the government's grasp, and, in furtherance of that effort, he contacted Morgan Stanley financial advisor Candido Viyella (who allegedly was a financial advisor to a number of Panamanians). By Bill Singer, Esq. / Copyright February 18, 2022.

SIDE BAR:

"Corcione defies prosecutors, envelopes the ACP in a cloud of corruption" (The Panama News / August 7, 2015)
https://www.thepanamanews.com/2015/08/corcione-defies-prosecutors-envelopes-the-acp-in-a-cloud-of-corruption/

"Alleged money launderers get off on someone else's plea" (The Panama News / October 7, 2016)
https://www.thepanamanews.com/2016/10/alleged-money-launderers-get-off-on-someone-elses-plea/

Thanks But No Thanks

In response to Corcione's request to open an account, Viyella and his team submitted a new account application to Morgan Stanley, but, go figure, in late 2015 (around September), the firm rejected the application. Depending upon whom you ask, either Morgan Stanley affirmatively conveyed its rejection to Corcione or the firm merely declined the request by taking no final action to approve the request -- in any event, the result is the same: no account was opened at Morgan Stanley for Corcione.By Bill Singer, Esq. / Copyright February 18, 2022.

The Hotel and the Promissory Note

Okay -- so now, sit down and make yourself comfortable because we're going to take a detour back in time in order to make sense of what is going to happen in the future. Read the following bullet-points very, very slowly:

Sometime in 2013, Candido Viyella's family bought a hotel
Viyella's wife wholly controlled Terrena Properties LLC
Terrena Properties partially owned CFLB Management
CFLB Management partially owned CFLB Partnership LLC
CFLB Partnership LLC owned the hotel property
CFLB Management issued promissory notes to finance the hotel's construction

While Corcione was trying to relocate his assets and open a Morgan Stanley account, Fundacion Nicor ("Nicor") had sustained financial losses from its investment in promissory notes issued by CFLB Management. Apparently, you can trace that lousy investment to the financing of a hotel that was indirectly owned/controlled by Morgan Stanley financial advisor Viyella's family/wife. By Bill Singer, Esq. / Copyright February 18, 2022.

SIDE BAR: In an effort to flesh out the above bullet-points in this February 18, 2022, update, consider this supplemental explanation as set out in Candido Viyella, Plaintiff, v. Fundacion Nicor and Morgan Stanley Smith Barney, LLC, Defendants (Order, United States District Court for the Southern District of Florida, 19-CIV-25094 / February 28, 2020)
http://brokeandbroker.com/PDF/ViyellaSDFL200228.pdf[Ed: footnote omitted]:

The Amended Complaint and Cross-Claim make the following factual allegations. Defendant Nicor was "[led] by" Nicolas Corcione Perez Balladares ("Corcione"), a "well-known real estate developer and construction entrepreneur" in Panama. (Am. Compl. ¶ 18 (alteration added)). "Corcione was desperate to 'park' his assets outside of Panama as those assets were at threat of being frozen by Panamanian regulatory authorities" because Corcione was under government investigation for various fraudulent activities. (Id. ¶ 19).

Corcione contacted Viyella, a Morgan Stanley financial advisor, about becoming a customer of Morgan Stanley. (See id. ¶¶ 17, 20; Cross-Claim ¶ 12). "Viyella and his staff coordinated Corcione's customer application, but Corcione was affirmatively rejected as a Morgan Stanley customer in late 2015 . . . ."2 (Am. Compl. ¶ 20 (alteration added; emphasis omitted)). Morgan Stanley alleges it "determined to decline Nicor's account application in or about September 2015." (Cross-Claim ¶ 11). Morgan Stanley further alleges Nicor "never opened an account with Morgan Stanley" (id. ¶ 15), "never deposited any funds or securities with Morgan Stanley" (id. ¶ 16), and "never purchased any securities through or from Morgan Stanley" (id. ¶ 17)

In the meantime, Viyella's family acquired a hotel property in 2013 through a series of entities. (See Am. Compl. ¶¶ 15-16). Terrena Properties LLC, an entity wholly controlled by Viyella's wife, partially owned CFLB Management LLC, which partially owned CFLB Partnership LLC, which in turn owned the hotel property. (See id.).

To finance the construction of the hotel, CFLB Management issued promissory notes to "mostly foreign" investors. (Am. Compl. ¶ 14). Nicor purchased a promissory note issued by CFLB Management. (See id. ¶¶ 2, 17). According to the Amended Complaint, "[n]one of these foreign investors, including Nicor, were ever solicited by Viyella for investment in the [h]otel project in his role as a financial advis[o]r for Morgan Stanley." (Id. ¶ 17 (alterations added)). Corcione allegedly had been discussing potential investment opportunities with Viyella since 2011. (See id. ¶ 21).

Nicor allegedly suffered losses from its investment in the CFLB Management promissory note. (See Am. Compl. ¶ 2). Seeking recovery of those damages and other relief, Nicor initiated FINRA arbitration against Viyella and Morgan Stanley on October 18, 2019. (See id. ¶¶ 1-2; Crossclaim ¶ 18). Nicor also brought an action in state court against CFLB Management and CFLB Partnership relating to the promissory note. (See Mot., Ex. 2, State Ct. Compl. [ECF No. 49-2]).

B. Nicor's Statement of Claim before the FINRA

After Nicor lost its investment on the CFLB Management promissory note, it initiated FINRA arbitration against Viyella and Morgan Stanley, alleging before the FINRA that Viyella, as a Morgan Stanley financial advisor and registered representative, induced Nicor to purchase a faulty promissory note, and Morgan Stanley violated its obligation to supervise its representative Viyella's activities. (See generally Mot. Ex. 1, Statement of Claim [ECF No. 49-1]). Nicor's Statement of Claim in the FINRA arbitration sets forth much of the same factual background as the Amended Complaint. (See generally id.).

Nicor sought to open an account at Morgan Stanley and expressed to Viyella its interest in doing so. (See Statement of Claim 4). Nicor was familiar with Viyella because "Viyella is the financial advisor for many families in Panama." (Id.). In September 2015, a Morgan Stanley employee "who is part of Viyella's team at Morgan Stanley" emailed Nicor the papers Nicor would need to sign in order to open an account, including an International Account Application and Client Agreement, which Nicor signed and returned. (Id. 4-5). Viyella informed Nicor in October 2015 that its application was under review and had not yet been approved. (See id. 5).

According to Nicor, Viyella and his wife formed Terrena Properties as a vehicle to invest in a hotel property. (See id. 3). CFLB Management issued a promissory note for $1 million to Nicor in November 2015, approximately two months after Nicor attempted to open the account at Morgan Stanley and one month after Viyella advised Nicor its application had not yet been approved. (See id. 17-24, Ex. 1, Demand Promissory Note). Viyella sent Corcione text messages recommending he purchase the promissory note (see Statement of Claim 5-6), characterizing it as "the best option for you" and a "very good investment" (id. 5 (internal quotation marks omitted)).

Nicor claims Viyella engaged in "selling away, unsuitability, and fraud" in violation of the FINRA's rules (id. 2), and Morgan Stanley was "required to supervise Viyella's activities and is responsible for Viyella's violations of the FINRA [r]ules" (id. 8 (alteration added)). According to Nicor, the "FINRA has several [r]ules that address the violations by Viyella, and therefore Morgan Stanley." (Id. 8 (alteration added)).

As to its claim of selling away, Nicor alleges Viyella violated the FINRA rules prohibiting a registered representative of a FINRA member from participating in outside business activity without notice to the member firm or participating in a private securities transaction. (See id. 8-9). As to the unsuitability claim, Nicor alleges Viyella violated the FINRA rule requiring a reasonable basis that a recommended transaction or investment strategy is suitable for the customer based on the customer's investment profile. (See id. 8). As to the fraud claim, Nicor alleges Viyella violated the FINRA rules requiring "high standards of commercial honor and just and equitable principles of trade" and prohibiting the effecting of a transaction through a "manipulative, deceptive, or other fraudulent device or contrivance." (Id.).

Nicor claims Morgan Stanley is also liable for Viyella's unlawful activities. (See id. 8, 12, 14). Nicor alleges these violations as well as several other legal claims, such as breach of fiduciary duty, breach of a broker's duty to supervise and ensure compliance with firm and industry rules, negligent and intentional misrepresentation, and breach of contract and the covenant of good faith and fair dealing. (See id. 15). Nicor requests compensatory damages of $1 million and other relief. (See id.).

at Pages 4 - 8 of the SDFL February 2020 Order

FINRA Arbitration

What did Fundacion Nicor do about its losses from the promissory note investment? Well, the company filed a FINRA Arbitration Statement of Claim against associated person Viyella and FINRA member firm Morgan Stanley alleging that Viyella had induced Fundacion Nicor into purchasing the promissory note and that Morgan Stanley had failed to supervise its rep's activities. By Bill Singer, Esq. / Copyright February 18, 2022.

Not Takin' Care of Business

As Fundacion Nicor made out its FINRA case, the company alleged that in November 2015, Viyella sent text messages to Corcione recommending the purchase of a $1 million promissory note issued by CFLB Management for the construction of a hotel. Viyella's communications allegedly characterized his recommendation of the notes as "the best option for you" and a "very good investment." When the investment went into the crapper, Fundacion Nicor alleged that Viyella's recommendation had violated FINRA's Outside Business Activity Rule and/or Private Securities Transaction Rule because the rep had allegedly failed to notify Morgan Stanley in advance. Further, Fundacion Nicor alleged that Viyella's recommendation was unsuitable, and that the rep had engaged in a fraud -- for which Morgan Stanley had some derivative liability. After adding in a few other causes, Fundacion Nicor sought $1 million in compensatory damages plus other relief. By Bill Singer, Esq. / Copyright February 18, 2022.

A Federal Case: Viyella v. Fundacion Nicor and Morgan Stanley Smith Barney

You got all of that? Really?? Yeah, sure you do . . . in any event, we soon find ourselves on another train on another set of tracks -- these in the United States District Court for the Southern District of Florida ("SDFL").By Bill Singer, Esq. / Copyright February 18, 2022.

Reversing their roles as aggrieved parties, we find in the the SDFL case that Viyella, a respondent in the FINRA arbitration, is now the Plaintiff in a federal case seeking to enjoin Nicor's FINRA Arbitration. Candido Viyella, Plaintiff, v. Fundacion Nicor and Morgan Stanley Smith Barney, LLC, Defendants (Order, United States District Court for the Southern District of Florida, 19-CIV-25094 / February 28, 2020)

http://brokeandbroker.com/PDF/ViyellaSDFL200228.pdfBy Bill Singer, Esq. / Copyright February 18, 2022.

In his SDFL Complaint and as amended, Viyella sought a Declaration that Fundacion Nicor's claims are not arbitrable under FINRA Rule 12200 because neither Viyella nor Morgan Stanley had ever entered into an arbitration agreement with Fundacion Nicor, and, most critically, that Fundacion Nicor was never, ever a "customer" of Viyella's or Morgan Stanley because no account was ever opened for the company at the firm. Finally, Viyella asserted that any dispute pertaining to the promissory note did not arise within the context of his activities as a Morgan Stanley advisor or as part of any of his firm's business activities. Given the alleged absence of an arbitration agreement and of any customer relationship, Viyella asked SDFL to issue an injunction against Nicor's FINRA arbitration. Morgan Stanley largely joined in Viyella's motion practice. By Bill Singer, Esq. / Copyright February 18, 2022.

In response to Viyella's and Morgan Stanley's arguments, Fundacion Nicor asserted that it had signed a Morgan Stanley Client Agreement which contained an arbitration agreement, that arbitration is mandated under the FINRA Code of Arbitration, that Fundacion Nicor is, indeed, a "customer" of both Viyella and Morgan Stanley as set forth under FINRA Rule 12200, and that the disputes arose in connection with Viyella's and Morgan Stanley's business activities. By Bill Singer, Esq. / Copyright February 18, 2022.

SIDE BAR: The FINRA Rulebook

FINRA Rule 0160: Definitions

(a) The terms used in the Rules, if defined in the FINRA By-Laws, shall have the meaning as defined in the FINRA By-Laws, unless a term is defined differently in a Rule, or unless the context of the term within a Rule requires a different meaning.

(b) When used in the Rules, unless the context otherwise requires:
. . .

(4) "Customer"
The term "customer" shall not include a broker or dealer.

FINRA Rule 12200: Arbitration Under an Arbitration Agreement or the Rules of FINRA

Parties must arbitrate a dispute under the Code if:

Arbitration under the Code is either:

(1) Required by a written agreement, or
(2) Requested by the customer;

The dispute is between a customer and a member or associated person of a member; and
The dispute arises in connection with the business activities of the member or the associated person, except disputes involving the insurance business activities of a member that is also an insurance company.

SDFL Broadly Construes "Customer" -- sends dispute back to FINRA Arbitration

SDFL declines to narrowly construe the term customer, as argued by Viyella and Morgan Stanley, and the court similarly rejects the narrow construction argued for the term business activities. Ultimately, the Court offers this rationale, in part, for denying the Motion for a Preliminary Injunction Against Proceeding in FINRA Arbitration [Ed: footnotes omitted] By Bill Singer, Esq. / Copyright February 18, 2022.

[M]ovants' concern that Morgan Stanley would have to arbitrate unrelated disputes involving its employees is easily assuaged here. Movants fail to show the dispute between the parties here did not arise in connection with Morgan Stanley's or Viyella's business activities because, as stated, Nicor alleges Viyella provided him investment advice while Viyella was employed as a financial advisor at Morgan Stanley, and Morgan Stanley failed to supervise Viyella. (See generally Statement of Claim). Movants' proposed limitation of the business activities requirement risks blocking claimants from initiating FINRA arbitrations on selling away or negligent supervision claims because those claims necessarily involve activity not explicitly sanctioned by the FINRA member.

Because Movants fail to carry their burden as to the first necessary element to obtain a preliminary injunction, they are not entitled to relief, and the Court need not address Movants' arguments on the remaining elements for preliminary injunctive relief. . . .

Pages 16 -17 of the SDFL Order

SIDE BAR:

"Cannabis Science Case Smokes Definition Of Brokerage Customer" (BrokeAndBroker.com Blog / February 19, 2020)
http://www.brokeandbroker.com/5074/lek-abbar-cannabis/

"Dismissed FINRA Arbitration Against JP Morgan Involves Horrific Backstory" (BrokeAndBroker.com Blog / January 10, 2020)
http://www.brokeandbroker.com/5005/finra-gigi-jordan/

"11th Circuit Rejects Mandatory FINRA Arbitration By Customers" (BrokeAndBroker.com Blog / September 25, 2018)
http://www.brokeandbroker.com/4200/finra-11cir-arbitration/

Morgan Stanley Discharges Viyella on November 18, 2020

Online FINRA BrokerCheck records as of February 18, 2022
https://files.brokercheck.finra.org/individual/individual_1829255.pdf, disclose that "MSWM" had "discharged" Viyella on November 18, 2020, based upon allegations that:

Registered representative terminated after allegations were made accusing him of participation in an outside investment involving clients for which the registered representative had a beneficial ownership interest.

FINRA Discloses Two Settled Customer Disputes

FINRA BrokerCheck records further disclose that there are two "customer dispute-settled" matters involving Viyella By Bill Singer, Esq. / Copyright February 18, 2022.:

1. The allegations reported by "MSSB": "Claimant alleges inter alia FA solicited outside investment opportunity in or about October 2015 that was not authorized by Firm."
The "Product Type" is disclosed as "Promissory Note" and the alleged damages are disclosed as $1,000,000.00.
The matter is reported as having settled on February 26, 2021, for $140,000 without any contribution by Viyella.

2. The allegations reported by "MSSB": "Claimant alleges inter alia FA solicited outside investment opportunity in or about October 2015 that was not authorized by Firm."
The "Product Type" is disclosed as "Promissory Note" and the alleged damages are disclosed as $500,000.00.
The matter is reported as having settled on February 26, 2021, for $60,000 without any contribution by Viyella.

FINRA Discloses Three Pending Customer Disputes

FINRA BrokerCheck records further disclose that there are three "customer dispute-pending" matters involving Viyella By Bill Singer, Esq. / Copyright February 18, 2022.:

1. The allegations reported by "Morgan Stanley": "Claimants allege, inter alia, fraudulent misrepresentation with respect to outside investment opportunities not authorized by the firm that were solicited by the FA between 2013-2015."
The "Product Type" is disclosed as "Promissory Note" and the alleged damages are disclosed as $2,000,000.00.
The matter is reported as Docket # 2020-007502-CA-01 in the Circuit Court of the 11th Judicial Circuit in and for Miami-Dade County, Florida.

2. The allegations reported by "MSSB": "Claimants allege, inter alia, FA solicited outside investment opportunity in or about October 2013 that was not authorized by Firm."
The "Product Type" is disclosed as "Promissory Note" and the alleged damages are disclosed as $0.00.
The matter is reported as FINRA Arbitration # 20-03478 filed on October 12, 2020.

3. The allegations reported by "MS": "Claimants allege, inter alia, FA solicited outside investment opportunity not authorized by firm -- Oct 15, 2015 - Oct 18, 2019."
The "Product Type" is disclosed as "Promissory Note" and the alleged damages are disclosed as $0.00.
The matter is reported as FINRA Arbitration # 19-03149 filed on October 2, 2019.

May 10, 2021: FINRA Imposes Bar Upon Viyella

In the Matter of Candido J. Viyella, Respondent (FINRA AWC 2019064630801 / May 10, 2021)

https://www.finra.org/sites/default/files/fda_documents/2019064630801
%20Candido%20J.%20Viyella%20CRD%201829255%20AWC%20sl%20%282021-1623370822468%29.pdf

For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, Candido J. Viyella submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In accordance with the terms of the AWC, FINRA imposed upon Viyella a BAR from associating with any FINRA member in all capacities. By Bill Singer, Esq. / Copyright February 18, 2022. The AWC asserts in part that:

On April 20, 2021, in connection with its investigation into whether Viyella participated in private securities transactions without providing prior written notice to Morgan Stanley, FINRA requested, pursuant to FINRA Rule 8210, that Viyella appear for on-the-record testimony. As stated by his counsel during a telephone call with FINRA on April 20, 2021, and by this agreement, Viyella acknowledges that he received FINRA's request and will not appear for on-the-record testimony at any time. By refusing to appear for on-the-record testimony as requested pursuant to FINRA Rule 8210, Viyella violated FINRA Rules 8210 and 2010.

at Page 2 of the FINRA Viyella AWC

February 8, 2022, "AdvisorHub" Article by Mason Braswell

"Barred Florida Broker Lobs Defamation Claim at Morgan Stanley" (AdvisorHub.com by Mason Braswell / February 8, 2022)
https://www.advisorhub.com/barred-florida-broker-lobs-defamation-claim-at-morgan-stanley/#disqus_thread

AdvisorHub's Braswell reports that Viyella had filed a lawsuit in the United States District Court for the Southern District of Florida against his former employer Morgan Stanley. Braswell states in part that:

Morgan Stanley fired Viyella, who was said to have generated around $5 million in annual revenue, in November 2020 for allegations that he participated alongside clients in an undisclosed outside investment, according to his BrokerCheck record. Finra barred him in May 2021 after he declined to cooperate with its investigation into the outside activities, according to BrokerCheck.

Viyella then joined a multi-family office, BigSur Partners, where he sought to continue to work with some of his former clients as an unregistered "relationship manager." As part of his work, he and his sons wanted account statements, trade confirmations and other information so he could provide "money management and consulting services" to some of his former Morgan Stanley customers who wanted to work with him at BigSur.

Morgan Stanley instead told his clients, who still maintained accounts at the wirehouse, that it would not be doing business with Viyella. It falsely "manufactured an administrative issue" in a letter to customers in which it told them that he would not be sharing any of their information, Viyella claimed.

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