The New York Stock Exchange’s regulator group says that Morgan Stanley must pay $500,000 for not overseeing a group of brokers that had recommended unsuitable transactions for accounts belonging to the guardians of injured children and to retirees. The guardian accounts were for children, 10 to 18 years of age, who received medical malpractice settlements after being injured at birth or as a child.
NYSE regulation started investigating the brokerage firm about three years ago. Disciplinary action has been taken against two brokers, while two other brokers and a branch manager were also investigated for misconduct.
The branch manager investigated in the case is believed to have known that there were court-ordered trade restrictions for the guardian accounts but did not tell staff members about them. The court had only authorized the guardian accounts to invest in Treasury strips and bonds. Commissions and fees were to remain low, which they did not.
Morgan Stanley is being held accountable for failing to hold on to and look over business correspondence from the brokers and not having proper procedures in place for inputting and distributing block trades. Complaints from customers were reported incorrectly or not at all.
Since the investigation, Morgan Stanley has taken steps to avoid making violations like these again and the guardian accounts have been made whole again. The firm is not denying or admitting to the charges.
Shepherd Smith and Edwards is known nationwide as a securities litigation firm committed to helping investors that have been the victim of broker misconduct recover their losses. If you are an investor that is serious about getting your money back, contact Shepherd Smith and Edwards today.
Morgan Hit for Faulty Oversight, Investment News, June 22, 2007
Morgan Stanley Draws $500K Fine For Churning Accounts, Smart Money, June 14, 2007
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