Morgan Stanley Smith Barney to pay $15M penalty to settle SEC charges

abcnews.go.com:

Morgan Stanley Smith Barney will pay a $15 million penalty as part of a settlement with the Securities and Exchange Commission related to four financial advisers who stole millions of dollars of advisory clients’ and brokerage customers’ funds

Morgan Stanley Smith Barney will pay a $15 million penalty as part of a settlement with the Securities and Exchange Commission related to four financial advisers who stole millions of dollars of advisory clients’ and brokerage customers’ funds.

The settlement announced late Monday is also related to the firm's failure to adopt policies and procedures designed to prevent and detect such theft.

The SEC order said that MSSB failed to adopt and implement policies and procedures reasonably designed to prevent its financial advisers from using two forms of unauthorized third-party disbursements, Automated Clearing House payments and certain patterns of cash wire transfers, to misappropriate funds from customer accounts. The order said the financial advisers, located in Texas and California, made hundreds of unauthorized transfers from customers’ or clients’ accounts to themselves or for their own benefit.

Morgan Stanley formed a venture with Citigroup's Smith Barney in 2009 and purchased the business outright in 2013.

The SEC said that until at least December 2022, MSSB did not have a policy or procedure to screen externally initiated ACH payment instructions to detect instances in which one of its financial advisers assigned to the account bore the same name as the beneficiary listed in the ACH payment instructions. As a result the firm didn't detect hundreds of unauthorized ACH transfers between May 2015 and July 2022 from its customers’ or clients’ accounts.

“Safeguarding investor