Morgan Stanley and Scottrade Inc. agreed Monday to pay $950,000 to the Financial Industry Regulatory Authority for failing to monitor wire transfers of customer funds to third-party accounts.
Morgan Stanley was fined $650,000, while Scottrade was fined $300,000. Both firms neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.
From October 2008 to June 2013, FINRA found that three registered reps in two different Morgan Stanley branch offices — Paramus, New Jersey and Fort Lauderdale, Florida — converted a total of $494,400 from thirteen customers by creating fraudulent wire transfer orders and branch checks from the customers’ accounts to third-party accounts.
The reps, for instance, moved funds from multiple customer accounts to their own personal bank accounts or to banks that held the representative’s mortgage.
FINRA found that Morgan Stanley failed to implement reasonable supervisory systems and procedures to review and monitor transmittals of customer funds through wire transfers from multiple customer accounts to the same third-party accounts and outside entities. The supervisory failures allowed the conversions to go undetected.