Morgan Stanley (MS) has agreed to settle a case in Mississippi and pay $4.7 million, $4.2 million of which will be used to compensate investors.
The case involves about 200 clients who had accounts handled by the Ridgeland branch office from December 2007 to June 2012 and mainly worked with then-advisor Steven Wyatt, who was barred from the industry in May, and advisor Hilary Zimmerman; their branch supervisor at the time was Fred Brister, who gave up his securities registration when he retired in May.
According to FINRA records, some clients previously won damage awards in disputes involving the advisors; the investors said they conducted unauthorized trades, conducted excessive turnover and bought unsuitable investments for them, while misrepresenting the investment strategies.
Prior to the settlement, Mississippi’s Securities Division conducted a multi-year investigation after receiving complaints from clients who had lost money.
“This is a significant settlement which is a culmination of hard work by the Division on behalf of investors,” said Secretary of State Delbert Hosemann, in a statement released Wednesday. “It exemplifies the important investor protection role the Agency serves to safeguard our citizens through fair regulation and enforcement and hopefully deterrence.”
For its part, Morgan Stanley says it “fully cooperated” with regulators.
“The settlement focuses mainly on losses incurred nearly eight years ago during a period of violent market decline by clients in the Ridgeland, Mississippi, branch who invested in discretionary aggressive growth or growth portfolios managed by former financial advisor Steve Wyatt, who has not been with the firm since June 2012,” the firm explained in a statement. “We take extremely seriously our responsibility for placing our clients’ interests first and are pleased that the state’s investigation has been concluded.”
Mississippi’s investigators concluded that the broker-dealer, in some instances, “failed to reasonably supervise” some employees in Ridgeland and “failed in some instances to enforce supervisory procedures.”
For instance, the regulators found that during the account-opening process for clients, customer information — which included clients’ risk tolerance, investment objected and other details — was entered inaccurately.
“The inaccurate customer information was not detected or questioned by the firm at account opening, although the firm had systems in place to provide the profile information to the customers for them to review the information and correct any inaccuracies,” according to the consent order.