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January 13, 2017 at 09:20 AM
The Securities and Exchange Commission said Friday that Morgan Stanley has agreed to pay $13 million to settle charges that it overbilled investment advisory clients due to coding and other billing system errors. In addition, the firm violated a custody rule pertaining to annual surprise examinations, according the regulatory group.
The SEC found that Morgan Stanley overcharged some 149,000 advisory clients “because it failed to adopt and implement compliance policies and procedures reasonably designed to ensure that clients were billed accurately according to the terms of their advisory agreements.”
Plus, the wirehouse did not validate billing rates against client contracts, fee billing histories and other documents.
”Investors must be able to trust that their investment advisors have put appropriate safeguards in place to ensure accurate billing. The long-running deficiencies in those safeguards at Morgan Stanley resulted in 36 different types of billing errors that caused overcharges to customers,” said Andrew M. Calamari, director of the SEC’s New York Regional Office, in a statement.
The SEC says Morgan Stanley received more than $16 million in excess fees from the billing errors, which took place from 2002 to 2016.
“Morgan Stanley Wealth Management is pleased to settle this matter, which included inadvertent billing errors in certain managed accounts. All affected clients have been reimbursed, and the firm has enhanced its policies and procedures, including discontinuing the use of certain legacy systems,” the company explained in a statement.
