Morgan Stanley & Co. Inc. has consented to pay half a million dollars to settle Securities and Exchange Commission charges that it recommended unapproved money managers to clients. The SEC claims the broker-dealer breached its fiduciary duty to Nashville advisory clients when it made material misstatements about a program designed to help clients choose money managers who were “properly vetted,” as well as assist them in developing investment goals.
Instead, the SEC claims that Morgan Stanley suggested money managers who were not approved to take part in the broker-dealer’s advisory programs and did not undergo the firm’s due diligence process. The SEC says that it was specifically William Phillips, a former Morgan Stanley broker based in Tennessee, who guided clients to three managers who were “unapproved.”
The clients were not told that the managers gave Morgan Stanley and Phillips significant fees or commissions of at least $3.3 million. The alleged incidents took place from 2000 to through early 2006.
Meantime, Phillips is contesting the charges against him and Is denying that he engaged in any impropriety. Phillips’s attorney claims the SEC is not alleging antifraud violations and that the allegations did not stem from any client complaints.
By agreeing to settle, Morgan Stanley is not admitting to or denying the allegations. The broker-dealer, however, did agree to cease and desist from violations in the future.
Scott Friestad, the SEC’s Associate Enforcement Director, recently noted that it is the job of investment advisers to put investors’ interests before their own and to give clients accurate and complete information at all times.
Related Web Resources:
Morgan Stanley paying $500,000 to settle SEC charges of misleading clients in Nashville, Newser.com, July 27, 2009
SEC Charges Morgan Stanley and Former Adviser with Misleading Clients, SEC, July 20, 2009
Related Web Resources:
Read the SEC’s Order against Morgan Stanley (PDF)
Read the SEC’s Order Against Phillips (PDF)
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