Morgan Stanley paying nearly $1M settlement
NASHUA – New Hampshire financial regulators imposed a $450,000 fine against New York City-based investment bank Morgan Stanley after one of the firm’s former employees engaged in “excessive trading and other unauthorized activity.”
In total, Morgan Stanley agreed to pay a settlement of nearly $1 million for the actions, with $483,284.96 of this being the amount three New Hampshire clients in excess of age 60 lost as a result of their dealings with one of the bank’s representatives.
“We are pleased to resolve this matter which concerned conduct that ended in May 2014,” Morgan Stanley spokeswoman Susan Siering told The Telegraph.
The figure approaching $1 million includes:
returning the $483,284.96 lost by the three investors;
paying the $450,000 fine to the New Hampshire Bureau of Securities Regulation; and
legal costs of $50,000.
According to Bureau Staff Attorney Noah Abrahams, the employee involved resigned from Morgan Stanley in May 2014, which matches the month Siering identifies as the time the problems ended.
“Brokers must ensure that all levels of trading are suitable for each client. A broker will violate this rule if engaged in churning because the purpose of churning is to solely benefit the broker by generating excessive commissions through excessive trading that is not suitable,” Abrahams said.
“It is also incumbent on firms to continually improve their systems that monitor for excessive trading activity,” he added.
Information from the U.S. Securities and Exchange Commission (SEC) states that “churning is illegal and unethical.”
“Churning occurs when a broker engages in excessive buying and selling of securities in a customer’s account chiefly to generate commissions that benefit the broker. For churning to occur, the broker must exercise control over the investment decisions in the customer’s account, such as through a formal written discretionary agreement,” SEC information adds.
Abrahams said a separate 2015 action by the Financial Industry Regulatory Authority permanently barred the former Morgan Stanley employee from working in the securities industry.