Finra sanctions Morgan Stanley over UIT sales

Firm will pay $13 million in fines and restitution for failure to supervise

Sep 25, 2017 @ 12:34 pm

By InvestmentNews

Finra has fined Morgan Stanley $3.25 million and required the firm to pay approximately $9.78 million in restitution to more than 3,000 affected customers for failing to supervise its brokers' short-term trades of unit investment trusts.

The Financial Industry Regulatory Authority Inc. found that from January 2012 through June 2015, hundreds of Morgan Stanley brokers executed short-term UIT rollovers, including UITs rolled over more than 100 days before maturity, in thousands of customer accounts.

Finra said the firm failed to adequately supervise representatives' sales of UITs because it provided insufficient guidance to supervisors regarding how they should review UIT transactions to detect unsuitable short-term trading, failed to implement an adequate system to detect short-term UIT rollovers and failed to provide for supervisory review of rollovers prior to execution within the firm's order entry system. Morgan Stanley also failed to conduct training specific to UITs, Finra said.

UITs impose a variety of charges, including a deferred sales charge and a creation and development fee, that can total approximately 3.95% for a typical 24-month UIT, Finra said.

"A registered representative who repeatedly recommends that a customer sell his or her UIT position before the maturity date and then 'rolls over' those funds into a new UIT causes the customer to incur increased sale charges over time, raising suitability concerns," Finra said in a release.

In its settlement with Finra, Morgan Stanley neither admitted or denied the charges, but consented to the regulator's findings.

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Featured video

Events

How 401(k) advisers can use 'centers of influence' to grow their business

Leveraging relationships with accounting, benefits, and property and casualty insurance firms can help deliver new business leads for retirement plan advisers.

Latest news & opinion

SEC advice rule may give RIAs leg up over broker-dealers

Experts say advisers will be able to point to their role as fiduciaries as a differentiator in the advice market.

Brokers accept proposed SEC rule on who can call themselves an adviser

Some say the rule will clear up investor confusion, but others say the SEC didn't go far enough.

SEC advice rule: Here's what you need to know

We sifted through the nearly 1,000-page proposal and picked out some of the most important points.

SEC advice rule seeks to tighten reins on brokers

The proposed rule puts new restrictions on brokers, but it is still unclear how strongly the SEC is clamping down.

SEC advice rule hearing updates

Commission says a lot of work ahead, public will have 90 days to comment.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print