Morgan Stanley to pay fine over CFTC customer-fund claims

The bank's Smith Barney futures brokerage in April 2013 transferred $16 million to the wrong type of account holding customer funds, resulting in a violation of CFTC rules

Mar 28, 2014 @ 9:29 am

Morgan Stanley will pay $490,000 to settle U.S. Commodity Futures Trading Commission allegations that the company failed to adequately oversee customer funds.

The bank's Smith Barney futures brokerage in April 2013 transferred $16 million to the wrong type of account holding customer funds, resulting in a violation of CFTC rules, the agency said in a statement Thursday announcing the settlement. Customers didn't lose any funds as a result of the company's failures in internal controls and supervision, the regulator said.

In 2012, the brokerage also commingled customer and company funds and improperly titled accounts for customer funds, the CFTC said Thursday. The bank hired KPMG LLP to review policies for overseeing customer funds.

“As the settlement notes, no customer lost any money as a result of these issues,” Christine Jockle, a spokeswoman for New York-based Morgan Stanley , said in a statement. “We cooperated fully with the CFTC, hired an outside auditor to review our procedures, and made improvements where required.”

The CFTC, which oversees futures and swaps markets, has pursued a series of enforcement actions against commodity brokerages for failing to oversee funds since MF Global Holdings Ltd.'s failure in 2011 resulted in an initial gap of $1.6 billion in customer funds.

Brokerage subsidiaries of Archer-Daniels-Midland Co. and Macquarie Group Ltd. reached settlements with the CFTC last year to resolve allegations of improper oversight of customer funds.

(Bloomberg News)


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