Morgan Stanley’s wealth unit is reportedly being investigated by several federal agencies over its practices and safeguards for vetting clients.
The Wall Street Journal, citing sources familiar with the matter, reports that the investment bank’s wealth management arm is being probed by the Securities and Exchange Commission (SEC), the Office of the Comptroller of the Currency, and other Treasury Department offices over whether it’s doing its due diligence in assessing clients, their financial activity, and the origins of their wealth.
Morgan Stanley declined Quartz’s request for comment.
Last year, the Journal reported, the SEC sent the New York-based bank a list of current and former clients, asking questions about how they were screened and why the bank’s financial advisor unit continued doing business with some of its wealthy clients who had been previously terminated by E*Trade, the bank’s digital trading platform, due to concerns.
The Federal Reserve launched a similar probe in November, according to an earlier report by the Journal.
This is not the first time Morgan Stanley, or one of its branches, has come under scrutiny by the federal regulators. In the past 10 years, Morgan Stanley has agreed to 12 settlements with the SEC totaling more than $600 million.
Here’s a timeline of the penalties Morgan Stanley has paid to the agency:
💸 July 2014
Morgan Stanley agreed to pay $275 million to settle SEC charges that it misled investors in a pair of residential mortgage-backed securities securitizations that it underwrote, sponsored, and issued.
📈 December 2014
The SEC hit Morgan Stanley with a $4 million penalty for violating the market access rule.
🚗 December 2015
Morgan Stanley Investment Management, its capital management arm, agreed to pay $8.8 million to settle charges that one of its portfolio managers illegally prearranged trading, known as “parking,” that favored certain advisory client accounts over others.
👨💻 June 2016
Morgan Stanley Smith Barney (MSSB) — its U.S. wealth management business, now called Morgan Stanley Wealth Management — agreed to a $1 million penalty to settle charges related to its failures to protect customer information, some of which was hacked and offered for sale online.
💵 December 2016
Morgan Stanley agreed to pay $7.5 million to settle charges that it used trades involving customer cash to lower its borrowing costs in violation of the SEC’s Customer Protection Rule.
🧾 January 2017
MSSB agreed to a $13 million penalty to settle charges that it overbilled investment advisory clients due to coding and other billing system errors.
Later that same month, the unit agreed to another $2.96 million penalty to settle charges that they made false and misleading statements about a foreign exchange trading program they sold to investors.
📊 February 2017
MSSB agreed to an $8 million penalty and admitted wrongdoing to settle charges related to single inverse ETF investments it recommended to advisory clients.
🏦 June 2018
MSSB agreed to pay a $3.6 million penalty and implemented procedural and policy changes over its failure to prevents its personnel from misusing or misappropriating funds from client accounts.
💰 May 2020
MSSB agreed to create a $5 million fund to be distributed to harmed investors, settling charges that it provided misleading information to clients in its retail wrap fee programs regarding trade execution services and transaction costs.
🔄 September 2020
MSSB agreed to a $5 million penalty to settle charges that it violated regulations governing short sales in its brokerage prime swaps business.
ℹ️ September 2022
MSSB agreed to pay $35 million to settle SEC claims that it repeatedly failed to protect millions of customers’ personal information.
💲January 2024
Morgan Stanley agreed to pay more than $249 million to settle fraud charges and for failing to enforce information barriers.