More On Legal & Compliancefrom The Advisor's Professional Library
- Risk-Based Oversight of Investment Advisors Even if the SEC had a larger budget and more resources, it is doubtful that the Commission would have the resources to regularly examine all RIAs. Therefore, the SEC is likely to continue relying on risk-based oversight to fulfill its mission of protecting investors.
- Client Commission Practices and Soft Dollars RIAs should always evaluate whether the products and services they receive from broker-dealers are appropriate. The SEC suggested that an RIAs failure to stay within the scope of the Section 28(e) safe harbor may violate the advisors fiduciary duty to clients, so RIAs must evaluate their soft dollar relationships on a regular basis to ensure they are disclosed properly and that they do not negatively impact the best execution of clients transactions.
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.