Nationwide Investigation into Former Advisor Program leaves Morgan Stanley Brokers Unemployed

Morgan Stanley has reportedly fired several brokers over alleged abuses in its Former Advisor Program, according to Advisor Hub this week.

According to the article, 10 brokers were fired in recent days after a nationwide investigation into the Former Advisor Program, that enables brokers retiring from the firm to split fees and commissions with brokers who inherit their client accounts if they don’t compete after leaving the firm. The firm believed that some advisors  were recording trades in the program incorrectly, according to Advisor Hub.

The Former Advisor Program, often referred to as sunset programs, creates a contract signed by the retiring advisor, the company, and the inheriting advisor.  Firms are responsible for  enforcing the contract since the retired advisor will not have any access to the commissions and fees generated by their legacy book once they have left the firm.

Advisors who inherited accounts in certain cases may have recorded commission transactions under their individual production numbers rather than the joint production numbers required under the Former Advisor Program agreements.

Miscoding trades could set off regulatory alarms and books-and-records violation charges for firms, according to the article.

Also, the terminated advisors may have claims against Morgan Stanley related to their termination.

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