National investment loss lawyers KlaymanToskes reports Morgan Stanley has agreed to pay a $15 million fine and accepted a censure to settle allegations by the Securities and Exchange Commission (“SEC”) that it failed to identify and address red flags indicating that at least four brokers misappropriated millions from customer accounts. The misconduct occurred between October 2015 and December 2022, and highlights significant gaps in the firm’s compliance and supervisory systems.
KlaymanToskes encourages customers of Morgan Stanley and/or any other brokerage firm who have suffered losses due to financial advisor misconduct to contact the law firm at 888-997-9956 or fill out a short contact form for a free and confidential consultation to discuss potential recovery options.
According to the SEC’s findings Morgan Stanley did not have adequate policies and procedures in place to detect unauthorized Automated Clearing House (ACH) fund transfers and wire requests. The firm violated the compliance rule under the Advisers Act, which requires firms to establish systems to prevent violations of securities laws.
For example, Morgan Stanley reportedly failed to screen fund transfer requests for mismatched beneficiary names and overlooked patterns of multiple, unrelated customers transferring funds to the same outside account. Despite recognizing these activities as red flags as far back as 2015, the firm relied on third-party fraud detection software without testing its effectiveness for five years.
The SEC identified four former Morgan Stanley brokers involved in the fraudulent activity:
If you suffered losses due to unsuitable investment advice or broker misconduct, contact KlaymanToskes at 888-997-9956 or fill out a short contact form for a free and confidential consultation to discuss your potential recovery options.
Morgan Stanley acknowledged its oversight failures and stated it has since strengthened its supervisory controls, working with outside experts. The firm has also compensated affected clients and agreed to have a compliance consultant review all forms of third-party cash disbursements from customer accounts as part of the settlement. This is not the first time Morgan Stanley has faced scrutiny for compliance lapses. In 2018, the firm paid $3.6 million to settle allegations related to fraudulent transfers by New Jersey broker Barry F. Connell, who stole $7 million through unauthorized transactions between 2015 and 2016.
KlaymanToskes encourages investors who have suffered losses due to financial advisor misconduct to contact the firm at 888-997-9956 or visit www.klaymantoskes.com for a free and confidential consultation to discuss your potential recovery options.
KlaymanToskes is a leading national securities law firm which practices exclusively in the field of securities arbitration on behalf of retail and institutional investors throughout the world in large and complex securities matters. The firm has recovered over $250 million in FINRA arbitrations and over $350 million in other securities litigation matters. KlaymanToskes has office locations in California, Florida, New York, and Puerto Rico.
KlaymanToskes, P.A.
Lawrence L. Klayman, Esq.
888-997-9956
investigations@klaymantoskes.com
www.klaymantoskes.com