Morgan Stanley expects $200 million fine for misuse of personal devices

Morgan Stanley expects to pay a $200 million fine related to a broad U.S. investigation into the use of unapproved personal devices, according to its earnings statement.

That amount is based on discussions the firm has had with the Securities and Exchange Commission and the Commodity Futures Trading Commission, which have been probing the matter across Wall Street.

The bank disclosed the expense in its second-quarter earnings, saying the firm’s efficiency ratio was 74%, impacted by $200 million “related to a specific regulatory matter concerning the use of unapproved personal devices and the firm’s record-keeping requirements.”

In December, the SEC and the CFTC imposed $200 million in fines on JPMorgan Chase & Co., saying that even managing directors and other senior supervisors at the bank had skirted regulatory scrutiny by using services such as WhatsApp or personal email addresses for work-related communication.

In February, Citigroup Inc. said in a filing that it was cooperating with the SEC as the regulator investigated “communications sent over unapproved electronic messaging channels.”

Q2 EARNINGS

Meanwhile, Morgan Stanley’s giant wealth management franchise continued to report positives in the face of the broad stock market decline in the first six months of the year, with the S&P 500 down 20.6% over that period.

Morgan Stanley’s wealth management net revenues for the three months ending in June totaled $5.7 billion, down from $6.1 billion for the same period in 2021, by almost all accounts a banner year for the broader financial advice and wealth management industries. Wealth management made up close to half — 43.5% — of Morgan Stanley’s net revenues of $13.1 billion for the second quarter.

Morgan Stanley stopped releasing the head count of its financial advisers last year, so it’s difficult to get a complete picture of the ebb and flow of experienced financial advisers into and out of the firm. Total client assets at Morgan Stanley at the end of June were $4.3 trillion, down from $4.8 trillion three months earlier.

But the firm reported net new assets of $53 billion during the second quarter, despite clients’ tax withdrawals, and $195 billion year-to-date. Morgan Stanley said the net new assets came from financial adviser-led stock plan vesting events, positive net recruiting, and its online and self-directed brokerage channel inflows, meaning ETrade.

Bruce Kelly contributed to this story.