Morgan Stanley Smith Barney, a FINRA member since 2009, is a publicly held company that engages in general securities business via 24,000 registered representatives working out of roughly 850 branch locations. The Firm was censured and fined $65,000 by FINRA Department of Enforcement in connection with allegations that the Firm had failed to establish and maintain written supervisory procedures and supervisory systems pertaining to check disbursements and wire transfers from client accounts, along with supervisory failures regarding acceptance and coding of money orders for deposit in client accounts by third party providers. Letter of Acceptance, Waiver and Consent No. 2011025479301 (June 19th, 2015). Such failures, according to the AWC, resulted in the fraudulent conversion and wire of $494,400 from multiple customers.
Acceptance, Waiver and Consent
According to the Acceptance, Waiver and Consent (“AWC”), from October of 2008 through June of 2013, 3 of Morgan Stanley’s registered representatives collectively fraudulently converted $494,400 from 13 of MSSB’s customers via executing bank checks and wire transfers that were sent to third-party accounts from customers’ accounts. The AWC indicates that throughout this period, the Firm did not have any written supervisory procedures or supervisory systems to monitor and detect the disbursement of such funds from the customers’ accounts to the third party account.
According to the AWC, one of the conversion schemes in Paramus, NJ, involved a registered representative 1 forging customers’ signatures on the outgoing wire transfer requests forms in the conversion of $94,000 from two of the Firm’s customers. In another instance in Fort Lauderdale, FL, a registered rep utilized a similar approach in converting $104,000 from a total of nine of the Firm’s customers. The AWC indicates hat the registered rep attempted to conceal the conversion by depositing money orders into a customer’s account in a monetary amount in excess of the Firm’s threshold for deposits (due to miscoding of money orders by third party providers), and then executing a transfer of funds within the Firm from one of the Firm’s customers to unrelated customers. In a third instance, a registered representative enacted a Firm’s issuance of branch checks out of customers’ accounts, where checks were payable to a bank holding the third representative’s mortgage. All three aforementioned reps were permanently barred by FINRA as a result of such conduct.
Additionally according to the AWC, the Department of Enforcement found that from June of 2009 through November of 2014, Morgan Stanley’s written supervisory procedures and supervisory systems were not adequately designed to monitor and review the transfer of client funds to third party accounts and other outside entities (evidenced by the aforementioned conversions) – a violation of FINRA Rule 2010 and NASD Conduct Rules 3010 and 3012.
The AWC finally found that from 2009 through September of 2011, Morgan Stanley’s written supervisory procedures and supervisory systems were not adequately designed to monitor and review the third party provider’s acceptance and coding regarding money orders received for deposit into the accounts of customers (evidenced by the aforementioned miscoding and resulting misappropriation from multiple customer accounts) – a violation of FINRA Rule 2010 and NASD Conduct Rule 3010.
Guiliano Law Group
Investors suffering losses or damages caused by Morgan Stanley in connection with this aforementioned conduct may be able to recover their investment losses. Our practice is limited to the representation of investors in claims, for fraud in connection with the sale of securities, the sale or recommendation of excessively risky or unsuitable securities, breach of fiduciary duty, and the failure to supervise. We accept representation on a contingent fee basis, meaning there is no cost to you unless we make a recovery for you, and there is never any charge for a consultation or an evaluation of your claim. For more information contact us at (877) SEC-ATTY.