Katy Yun Zhao (CRD #5264406) Has 2 Customer Dispute Disclosures on FINRA BrokerCheck

Katy Yun Zhao (CRD #5264406) is a broker with two customer dispute disclosures on FINRA BrokerCheck. We reviewed her BrokerCheck report on March 17, 2026. It reflects two customer disputes. If you invested with Katy Yun Zhao and have concerns, keep reading.

BrokerCheck link: BrokerCheck

BrokerCheck report: BrokerCheck Report (PDF)

Investor Disputes / Customer Complaints

Katy Zhao’s FINRA BrokerCheck report reflects two customer dispute disclosures. Summaries of the disputes are below:

On January 20, 2026, a claimant alleged, among other things, breach of fiduciary duty in the management of her investment account from 2021 through 2023. Katy Zhao’s FINRA BrokerCheck report lists the products as government debt and listed equities. The claim is pending in FINRA arbitration under case 25-02806, and the customer sought $50,000 in damages.

On February 21, 2025, a client verbally alleged that transfer instructions to move positions in kind to a contra firm were not followed. Katy Zhao’s FINRA BrokerCheck report lists the product as exchange-traded funds. The matter settled on February 21, 2025 for $156,637.15, with no individual contribution reported.

Rule Summary #1: FINRA Rule 2111 (Suitability)

FINRA Rule 2111 requires a reasonable basis to believe a recommendation is suitable for the customer based on the investor’s profile. Disputes about account management can raise questions about whether recommendations fit the customer’s objectives, risk tolerance, and needs.

Rule Summary #2: FINRA Rule 3110 (Supervision)

FINRA Rule 3110 requires firms to maintain a supervisory system and written procedures designed to achieve compliance with securities laws and FINRA rules. Customer disputes about account handling or transfer instructions can raise questions about whether the firm’s supervision was reasonably designed and followed.

Why This Matters to Investors (Regulation Best Interest)

Regulation Best Interest (Reg BI) is a U.S. securities regulation. It strengthens the standard of conduct that broker-dealers owe to retail investors. It applies when they recommend securities transactions or investment strategies. The U.S. Securities and Exchange Commission adopted Reg BI. It became effective on June 30, 2020. Reg BI aims to protect investors while preserving access to brokerage products and services.

Reg BI requires broker-dealers and financial advisors to act in a retail customer’s best interest at the time of a recommendation. They must not place their own financial or other interests ahead of the customer’s. This standard is higher than the older “suitability” rule. Suitability meant a recommendation only had to be appropriate. It did not have to be the best option or free of conflicts.

Reg BI has four key obligations:

Disclosure Obligation – Broker-dealers must disclose material facts about the relationship and the recommendation. This includes fees, the scope of services, and conflicts of interest.

Care Obligation – Broker-dealers must use reasonable diligence, care, and skill. They must consider costs, risks, and alternatives when making a recommendation.

Conflict of Interest Obligation – Firms must identify conflicts of interest. They must disclose them and mitigate or eliminate them. This includes conflicts that create incentives to favor one product over another.

Compliance Obligation – Firms must maintain policies and procedures. Those policies should be designed to ensure compliance with Reg BI as a whole.

Reg BI applies to each recommendation. It is not a continuous duty like the fiduciary standard for registered investment advisers. Even so, it narrows the gap. It puts more focus on costs, conflicts, and investor-focused decision-making.

Overall, Regulation Best Interest promotes transparency. It also aims to improve the quality of investment recommendations. It is designed to reinforce trust between retail investors and broker-dealers in the U.S. securities markets.

Background Information (from BrokerCheck)

Based on her FINRA BrokerCheck report, Katy Zhao:

Is currently registered with Morgan Stanley.

Has passed the Securities Industry Essentials (SIE) exam. Katy Zhao has also passed Series 79TO, Series 86, Series 87, Series 7, Series 65, and Series 63.

Has no prior registrations listed in the BrokerCheck report.

Kurta Law Can Help

If you have worked with Katy Zhao and you have concerns about her activity, Kurta Law may be able to help you evaluate your legal options. To speak with Kurta Law, call 877-600-0098 or email info@kurtalawfirm.com.

Helpful resources: Unsuitable Investments | Securities Attorney

For nearly 20 years, Kurta Law has advocated for investors and helped hold financial professionals accountable. Our firm represents clients nationwide in securities arbitration and related disputes. If you believe a broker or firm mishandled your account, an attorney can review the facts and explain possible next steps.