The Securities and Exchange Commission announced charges against Morgan Stanley Smith Barney LLC stemming from the firm’s “extensive failures,” over a five-year period, to protect the personal identifying information of 15 million customers. Morgan Stanley has agreed to pay a $35 million penalty to settle the SEC charges.
According to the SEC, since 2015 Morgan Stanley failed to properly dispose of devices containing its customers’ personal identifying information. On multiple occasions, Morgan Stanley hired a moving and storage company with no experience or expertise in data destruction services to decommission thousands of hard drives and servers containing the personal identifying information of millions of its customers.
Over several years, the SEC says the firm failed to properly monitor the moving company’s work. The SEC staff’s investigation found that the moving company sold thousands of Morgan Stanley devices, including servers and hard drives, to a third-party. Some of these devices reportedly contained customer’s personal identifying information and were resold on an internet site without removal of customer’s information.
“[Morgan Stanley Smith Barney’s] failures in this case are astonishing. Customers entrust their personal information to financial professionals with the understanding and expectation that it will be protected, and [Morgan Stanley] fell woefully short in doing so,” said Gurbir S. Grewal, director of the SEC’s Enforcement Division. “If not properly safeguarded, this sensitive information can end up in the wrong hands and have disastrous consequences for investors. Today’s action sends a clear message to financial institutions that they must take seriously their obligation to safeguard such data.”
Without admitting or denying its findings, Morgan Stanley Smith Barney consented to the SEC’s order and agreed to pay the $35 million penalty.
Morgan Stanley Smith Barney LLC is registered as both a brokerage firm and an investment advisor. The company buys and sells securities such as stocks, bonds, mutual funds, and other investment products, as well as manages investment portfolios and financial planning services.