Orderly Wall Street Self-Regulation
paying $ 13 million in fines and restitution to clients for failing to properly oversee transactions that increased fees and charges for clients of some investment funds.
The Financial Industry Regulatory Authority said on Monday that the investment bank had not provided enough advice to its staff on how to spot inappropriate short-term mutual fund transactions, or ITUs.
From January 2012 to June 2015, Morgan Stanley representatives advised thousands of clients to sell their UITs before their due date and transfer their investment to a new trust, according to the regulator.
A representative of the bank said he was happy to have solved this problem and to have been recognized by Finra for its cooperation.
By selling their ITU position before the maturity date and then transferring the funds to a new trust, clients can pay higher selling fees over time, Finra said.
ITUs are a type of investment fund that offers units in a portfolio of securities. At the end of the life of the trust, investors can receive an amount of cash equal to the net asset value of the units or they can transfer the present value of their investments to another trust.
Finra fined Morgan Stanley $ 3.25 million, while the bank will pay approximately $ 9.78 million in restitution to more than 3,000 customers.
âDue to the long-term nature of ITUs, their structure and up-front costs, short-term negotiation of ITUs may be inappropriate and raises adequacy issues,â said Susan Schroeder, Executive Vice President of Finra and responsible for the application.
In settling the investigation, Morgan Stanley neither admitted nor denied the charges, but consented to Finra’s findings coming in.
Write to Dick Streuly at [email protected]
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