Morgan Stanley hit with $950,000 for Failure to Supervise

FINRA sanctions Morgan Stanley after broker allegedly churns customer accounts.

According to the Financial Industry Regulatory Authority (FINRA) yesterday, the regulator has sanctioned Morgan Stanley in connection with alleged failures to supervise one of its brokers who purportedly churned client accounts. The wirehouse will reportedly pay $175,000 in fines and provide restitution of about $774,600, according to a Letter of Acceptance, Waiver & Consent (AWC).

From January 2012 through December 2017, the broker dealer allegedly failed to take reasonable steps to review short-term trades recommended by a Morgan Stanley registered representative, who was not named in the AWC.

On hundreds of occasions, the broker allegedly recommended short-term trades in corporate bonds and preferred securities in the accounts of 10 clients, according to the AWC. Because of their upfront sales charges, such investments are typically only suitable if held long term. The clients allegedly suffered more than $900,000 in losses as a result of the recommendations, according to FINRA.

The firm signed a letter of acceptance, waiver and consent on July 30, agreeing to FINRA’s sanctions, without admitting or denying the regulator’s claims.

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