SEC hits Morgan Stanley with $13 million fine

SEC hits Morgan Stanley with $13 million fine
Says wirehouse overbilled investment advisory clients due to coding and other billing system errors.
JAN 17, 2017
The Securities and Exchange Commission said on Friday that Morgan Stanley agreed to pay a $13 million penalty to settle charges that it overbilled investment advisory clients due to coding and other billing system errors. The firm also violated the custody rule pertaining to annual surprise examinations. Morgan Stanley overcharged more than 149,000 advisory clients because it failed to adopt and implement compliance policies and procedures reasonably designed to ensure that clients were billed accurately according to the terms of their advisory agreements, according to the SEC's order. Morgan Stanley also failed to validate billing rates contained in the firm's billing system against client contracts, fee billing histories, and other documentation, according to the SEC. The firm received more than $16 million in excess fees due to the billing errors that occurred from 2002 to 2016, according to the SEC. Morgan Stanley has reimbursed this full amount plus interest to affected clients. Morgan Stanley failed to comply with the annual surprise custody examination requirements for two consecutive years when it did not provide its independent public accountant with an accurate or complete list of client funds and securities for examination, according to the SEC. Morgan Stanley also failed to maintain and preserve client contracts. “Morgan Stanley Wealth Management is pleased to settle this matter, which included inadvertent billing errors in certain managed accounts,” wrote spokeswoman Christine Jockle in an email. ”All affected clients have been reimbursed and the firm has enhanced its policies and procedures, including discontinuing the use of certain legacy systems.” Morgan Stanley consented to the SEC's order and penalty without admitting or denying the SEC's findings. (More: SEC announces 2017 exam priorities, adds robo-advisers to its list)

Latest News

SEC bars ex-broker who sold clients phony private equity fund
SEC bars ex-broker who sold clients phony private equity fund

Rajesh Markan earlier this year pleaded guilty to one count of criminal fraud related to his sale of fake investments to 10 clients totaling $2.9 million.

The key to attracting and retaining the next generation of advisors? Client-focused training
The key to attracting and retaining the next generation of advisors? Client-focused training

From building trust to steering through emotions and responding to client challenges, new advisors need human skills to shape the future of the advice industry.

Chuck Roberts, ex-star at Stifel, barred from the securities industry
Chuck Roberts, ex-star at Stifel, barred from the securities industry

"The outcome is correct, but it's disappointing that FINRA had ample opportunity to investigate the merits of clients' allegations in these claims, including the testimony in the three investor arbitrations with hearings," Jeff Erez, a plaintiff's attorney representing a large portion of the Stifel clients, said.

SEC to weigh ‘innovation exception’ tied to crypto, Atkins says
SEC to weigh ‘innovation exception’ tied to crypto, Atkins says

Chair also praised the passage of stablecoin legislation this week.

Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest
Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest

Maridea Wealth Management's deal in Chicago, Illinois is its first after securing a strategic investment in April.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.