More On Legal & Compliancefrom The Advisor's Professional Library
- Differences Between State and SEC Regulation of Investment Advisors States may impose licensing or registration requirements on IARs doing business in their jurisdiction, even if the IAR works for an SEC-registered firm. States may investigate and prosecute fraud by any IAR in their jurisdiction, even if the individual works for an SEC-registered firm.
- Trading Practices and Errors When SEC-registered investment advisors conduct annual audits of firm policies and procedures, they should pay close attention to trading practices. Though usually not required to, state-registered advisors should look at their trading practices and revise policies that do not fully protect clients.
Morgan Stanley (MS) and Citigroup (C) said early Tuesday that they agreed on the valuation to be used in pricing Morgan Stanley’s purchase of an additional 14% stake in the Morgan Stanley Smith Barney joint venture: $13.5 billion for the business, which includes close to 17,000 advisors.
Morgan Stanley has agreed to acquire the next 15% stake in MSSB from Citi by June 1, 2013, subject to regulatory approval. In terms of the remaining 35% stake, this valuation would apply through June 1, 2015.
“This mutually beneficial agreement gives both parties certainty and transparency on price and timing, and is a significant milestone for Morgan Stanley in the implementation of our strategy,” said Morgan Stanley Chairman and CEO James Gorman (left) in a press release.
For the past few months, Morgan Stanley and Citigroup disputed the value of the Morgan Stanley Smith Barney joint venture. Citigroup said the full value of MSSB was $22 billion, while Morgan Stanley says it was worth only $9 billion (though its SEC filings put the value closer to $12 billion).
Both banks worked with Perella Weinberg Partners on an appraisal.
“I am pleased we have reached agreement on a value for our remaining stake in Morgan Stanley Smith Barney,” Citigroup CEO Vikram Pandit said in a statement. “Establishing certainty regarding the divestiture of this business is in the best interests of our shareholders. As we have shown, the more we put the past behind us, the more we can focus on our future, which is in the core businesses in Citicorp. Since forming Citi Holdings, we have reduced its assets by over $600 billion, and we will continue to do so in an economically rational manner.”
Morgan Stanley had a 50% drop in second-quarter profits, which totaled $563 million in the second quarter, compared with profits of $1.19 billion a year ago. The number of MSSB advisors dropped 2% from last quarter and 6% from last year to 16,934.
While Morgan Stanley has continued to see a number of top advisors and teams depart, it has been moving to address issues in its merged information-technology systems—including some new steps introduced to advisors over the past week regarding functionality of its new trading platform.