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Morgan Stanley Fined $650k for Inadequate Supervision of Its Brokers

Meyer Wilson

Morgan Stanley recently accepted and consented to FINRA’s findings that its lack of adequate supervisory systems resulted in three Morgan Stanley brokers being able to convert nearly $500,000 from 13 firm customers through fraudulent wire transfers and branch checks that were sent to third party accounts.

Between October 2008 and June 2013, during the time the alleged misconduct took place, FINRA says that Morgan Stanley did not have a supervisory system in place for the purpose of detecting and monitoring customer funds that were being transferred into a singular third-party account. In other words, FINRA claims that Morgan Stanley should have had a supervisory system that alerted the firm when money from unrelated investor accounts was being transferred into a common, third-party account.

FINRA identified three separate events involving Morgan Stanley representatives during the relevant time period:

  • Paramus, New Jersey
    Between October 2008 and January 2011, a broker allegedly stole $94,000 from two firm customers.
  • Fort Lauderdale, Florida
    Between February 2011 and August 2011, a broker allegedly stole $104,000 from nine firm customers.
  • Fort Lauderdale, Florida
    Between January 2012 and June 2013, a broker allegedly stole $296,000 from four firm customers.

FINRA claims that, had Morgan Stanley had adequate supervisory systems in place for detecting third party wire transfers, these instances of conversion of customer funds would not have been allowed to occur or they would have been caught quickly.

Registered broker-dealer firms can be held liable it their customers when they fail to supervise their brokers and those brokers participate in fraud or misconduct. Contact Meyer Wilson today if you would like a free evaluation of your case to discuss your legal rights and options.