Morgan Stanley to Pay SEC $3.6M for Failing to Protect Clients (1)

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By Jennifer Bennett

Morgan Stanley will pay $3.6 million to settle SEC allegations of failing to protect clients from employees’ misuse or misappropriation of funds.

Morgan Stanley Smith Barney LLC agreed to pay a $3.6 million fine to settle Securities and Exchange Commission claims the firm failed to protect client accounts from employee misbehavior, according to a June 29 agency order. The settlement follows February 2017 allegations that Morgan Stanley financial advisor Barry Connell misappropriated and misused $7 million from client accounts, the order said.

The firm has already repaid its clients in full with interest, according to an SEC statement. In settling, Morgan Stanley neither admitted nor denied wrongdoing.

“Investment advisers must view the safeguarding of client assets from misappropriation or misuse by their personnel as a critical aspect of investor protection,” Sanjay Wadhwa, Senior Associate Director of the SEC’s New York office, said in the statement. “Today’s order finds that Morgan Stanley fell short of its obligations in this regard.”

The firm is “pleased” about the settlement, Christine Jockle, executive director of corporate communications for Morgan Stanley, told Bloomberg Law. “Morgan Stanley has strengthened and will continue to improve its controls against fraudulent conduct to ensure the safety of our clients’ assets.”

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