More On Legal & Compliancefrom The Advisor's Professional Library
- Dealings With Qualified Clients and Accredited Investors Depending upon an RIAs business model and investment strategies, it may be important to identify “qualified clients” and “accredited investors.” The Dodd-Frank Act authorized the SEC to change which clients are defined by those terms.
- Client Communication and Miscommunication RIA policies and procedures must specify what type of communications should be retained. The safest course of action is for RIAs to retain all communicationsto clients, from clients, and about client accounts. To comply with fiduciary obligations, communications must be thorough and not mislead.
Morgan Stanley & Co. will pay the Financial Industry Regulatory authority (FINRA) a total of $12.5 million on behalf of its "former affiliate" Morgan Stanley Dean Witter, (MSDW) according to a FINRA statement issued September 27, for failing "on numerous occasions to provide emails to claimants in arbitration proceedings as well as to regulators--while representing that the destruction of the firm's e-mail servers in the September 11, 2001 terrorist attacks," which destroyed MSDW's World Trade Center offices, "resulted in the loss of all pre-9/11 email."
The FINRA statement says that "millions of pre-9/11 emails" that had been stored off-site before the attacks, and "had been restored to the firm's active e-mail system," but were not provided anyway.
In a "first of its kind" settlement, according to FINRA, $9.5 million will be distributed to "two groups of customers," which FINRA estimates to be "several thousand customers," to settle arbitration cases brought against MSDW. A separate fine of $3 million was imposed for the firm's "failure to provide pre-9/11 e-mails and updates to a supervisory manual."
Susan Merrill, executive VP and chief of enforcement at FINRA says in the announcement: "We are particularly pleased that this unique settlement directs the bulk of the monetary sanction to the customers in arbitrations, to remedy MSDW's discovery failures."
For the full statement from FINRA, please go here.