SEC Fines Morgan Stanley $3.6 Million for Failing to Detect Misappropriation of Client Funds
The Securities and Exchange Commission has fined Morgan Stanley Smith Barney $3.6 million for failing to protect against its personnel misusing or misappropriating funds from client accounts.
The Securities and Exchange Commission has fined Morgan Stanley Smith Barney $3.6 million for failing to protect against its personnel misusing or misappropriating funds from client accounts.
According to the SEC’s order, Morgan Stanley’s insufficient policies and procedures contributed to its failure to detect or prevent one of its advisory representatives, Barry F. Connell, from misusing or misappropriating approximately $7 million out of four advisory clients’ accounts in approximately 110 unauthorized transactions occurring over a period of nearly a year.
“Investment advisers must view the safeguarding of client assets from misappropriation or misuse by their personnel as a critical aspect of investor protection,” said Sanjay Wadhwa, senior associate director of the SEC’s New York regional office. “[The SEC’s] order finds that Morgan Stanley fell short of its obligations in this regard.”
Without admitting or denying the findings, Morgan Stanley consented to a $3.6 million penalty, censure, cease-and-desist order, and undertakings related to its policies and procedures. Morgan Stanley previously repaid the four advisory clients in full plus interest.
The SEC previously filed fraud charges against Barry Connell, who was also criminally charged by the U.S. Attorney’s Office for the Southern District of New York. Both sets of charges are currently pending.
