Katy Zhao: $50K Complaint Against Morgan Stanley Advisor

A recent investor complaint against Pasadena, California financial advisor Katy Zhao (CRD# 5264406) alleges that her conduct resulted in damages. Financial Industry Regulatory Authority records show that she is registered as a broker and an investment advisor with Morgan Stanley.

Ms. Zhao’s BrokerCheck report discloses two investor complaints. The most recent, filed in January 2026, alleges that as a representative of Morgan Stanley, she breached her fiduciary duty in connection with the customer’s account. The pending complaint alleges damages of $50,000.

An earlier investor complaint, filed in February 2025, alleged that as a representative of Morgan Stanley, she failed to follow the customer’s instructions to transfer positions. The complaint reached a settlement of $156,637.15.

For reference, securities industry rules stipulate that investment advisers must uphold a fiduciary duty to place their clients’ interests above their own. This includes a duty to completely disclose any conflicts of interest, and to operate in good faith and with loyalty to their clients. The fiduciary standard is similar to but distinct from the suitability standard established by FINRA Rule 2111, requiring brokers to recommend only investments that are aligned with a client’s background and objectives.

FINRA Rule 2010 states that FINRA-associated brokers must “observe high standards of commercial honor and just and equitable principles of trade.” Various forms of unethical conduct, including the failure to follow a customer’s directions, constitute violations of FINRA Rule 2010, provided the activities occur “in the conduct of [the member’s] business.” Brokers who violate Rule 2010 may be found liable for damages in the event of losses.

According to the Financial Industry Regulatory Authority, Katy Zhao holds 16 years of securities industry experience. Based in Pasadena, California, she has been registered as a broker and an investment advisor with Morgan Stanley 2009 and 2016, respectively. Her credentials include the passage of seven securities industry qualifying exams: the Securities Industry Essentials Examination, or SIE; the Uniform Investment Adviser Law Examination, or Series 65; the Uniform Securities Agent State Law Examination, or Series 63; the Research Analyst Exam – Part II Regulations Module, or Series 87; the General Securities Representative Examination, or Series 7; the Research Analyst Exam – Part I Analysis Module, or Series 86; and the Investment Banking Registered Representative Examination, or Series 79TO. She holds 35 state licenses. (Information current as of March 22, 2026.)

Carlson Law represents investors throughout the United States in claims against financial advisors and investment firms. If you or a loved one have suffered investment losses, please call us at 888-976-6111 or complete our contact form for a free and confidential consultation.