Morgan Stanley reaches $1 million settlement with Massachusetts over high-pressure sales contest

The contest involved persuading customers to take out securities-based loans in which they borrowed against the value of their portfolios

Apr 12, 2017 @ 3:15 pm

By Mark Schoeff Jr.

Morgan Stanley agreed to pay $1 million to Massachusetts to settle a case involving a high-pressure sales contest among its financial advisers to encourage clients to borrow money against their brokerage accounts.

From January 2014 until April 2015, the firm ran two different contests involving 30 advisers in Massachusetts and Rhode Island. The goal was to persuade customers to take out securities-based loans in which they borrowed against the value of the securities in their portfolios, with the securities serving as collateral.

Massachusetts Secretary of the Commonwealth William Galvin charged that Morgan Stanley encouraged its advisers to cross sell and failed to follow its own internal rules against sales contests, which he said violated the firm's fiduciary duty to its clients.

The firm did not admit or deny the charges in the settlement, which was signed April 7 and posted online this week.

"Morgan Stanley is pleased to resolve this matter with the Massachusetts Securities Division," spokeswoman Christine Jockle said a statement. "The order contains no finding of fraudulent activity or that any client took a loan that was unsuitable or unauthorized."

0
Comments

What do you think?

View comments

Recommended for you

Featured video

Events

FlexShares' Nimeri: Why is interest in ESG investing surging?

Sustainable and socially responsible have been familiar, but forgotten, investment sectors over the past 40 years. Why is that changing? Abdur Nimeri of FlexShares offers his perspective.

Video Spotlight

Help Clients Be Prepared, Not Surprised

Sponsored by Prudential

Recommended Video

Path to growth

Latest news & opinion

Brace for steepest rate hikes since 2006 in new year

Citigroup, JPMorgan Chase predict average interest rates across advanced economies will climb to at least 1 percent in 2018.

Why private equity wants a piece of the RIA market

Several factors, including consolidation in the independent advice industry and PE's own growing mountain of cash, are fueling the zeal to invest.

Finra bars former UBS rep for private securities transactions

Regulator says Kenneth Tyrrell engaged in undisclosed trades worth $13 million.

Stripped of fat commissions, nontraded REIT sales tank

The "income, diversify and interest rate" pitch was never the main draw for brokers.

Morgan Stanley fires former Congressman Harold Ford for misconduct

Allegations against the wirehouse's former managing director include sexual harassment, which Ford denies.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print