Morgan Stanley’s wealth management division is paying a hefty $15 million fine after four former advisors allegedly stole millions from client accounts.
Lax Security Allowed Millions in Theft
The Securities and Exchange Commission (SEC) claims Morgan Stanley Smith Barney (MSSB) failed to implement proper safeguards to prevent the theft. Between 2015 and 2022, these advisors reportedly made hundreds of unauthorized transfers to their own accounts. The SEC says MSSB lacked a system to detect advisors using their own names as beneficiaries of ACH payments, allowing the theft to go unnoticed.
SEC’s Accusations and Morgan Stanley’s Response
The SEC alleges MSSB violated the Investment Advisers Act of 1940 and the Securities Exchange Act of 1934 by failing to properly supervise its employees. Acting Director of the SEC’s Division of Enforcement, Sanjay Wadhwa, stated that protecting investor assets is crucial, and MSSB’s failures put many accounts at risk.
Morgan Stanley agreed to the $15 million fine without admitting guilt. They also accepted a cease-and-desist order and a formal reprimand. Furthermore, they’ve agreed to a review of their fund release procedures by an independent compliance consultant and have reimbursed all affected clients for their losses.
A Costly History
This isn’t the first time Morgan Stanley has faced significant fines. According to the Violation Tracker database, the firm has paid over $4.7 billion since 2000 to settle investor protection violations.
