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June 29, 2018 at 03:34 PM
The Securities and Exchange Commission announced that Morgan Stanley Smith Barney (MSSB) has agreed to pay a $3.6 million penalty for its failure to protect against its personnel misusing or misappropriating funds from client accounts.
The SEC finds that MSSB failed to have reasonably designed policies and procedures in place to prevent its advisory representatives from misusing or misappropriating funds from client accounts.
(MSSB became Morgan Stanley Wealth Management in 2012 but still uses Morgan Stanley Smith Barney as its broker-dealer designation.)
According to the SEC’s order, MSSB’s insufficient policies and procedures contributed to its failure to detect or prevent one of its advisory representatives, Barry Connell, from misusing or misappropriating approximately $7 million out of four advisory clients’ accounts in approximately 110 unauthorized transactions occurring over a period of nearly a year. Connell misappropriated over $5 million from the client accounts to fund his lavish lifestyle, the SEC says.
“Investment advisors must view the safeguarding of client assets from misappropriation or misuse by their personnel as a critical aspect of investor protection,” Sanjay Wadhwa, senior associate director of the SEC’s New York Regional Office, said in a statement. “Today’s order finds that Morgan Stanley fell short of its obligations in this regard.”
