SEC Fines Morgan Stanley $500,000

WASHINGTON (CN) – Morgan Stanley will pay $500,000 to settle charges that it misled its customers about the qualifications of its money managers and failed to disclose conflicts of interest, the SEC said Monday. The complaints involve Morgan Stanley’s Nashville office, and one of its top producers, William K. Phillips.




     Phillips steered client to “three unapproved managers” and he and Morgan Stanley “received substantial commissions or fees from these three unapproved managers,” the SEC said in a statement.
     The “misconduct” occurred from 2000 to at least April 2006, and involved Morgan Stanley’s “Vision I” program, the SEC said.
     According to the SEC statement: “Morgan Stanley described to clients that a detailed due diligence process was followed to select and approve money managers for Morgan Stanley financial advisers to recommend to clients. However, Phillips disregarded whether or not money managers had been vetted by Morgan Stanley before he recommended them to clients. He repeatedly failed to follow Morgan Stanley’s policy that required its financial advisers to recommend at least three approved money managers to a client for each investment strategy. Instead, Phillips consistently recommended only a single unapproved manager for clients to select. Furthermore, advisory clients were not informed about the conflicts of interest that Morgan Stanley and Phillips had in recommending these unapproved money managers to clients. The firm and adviser had a financial incentive to recommend these unapproved managers based on the relationships that Phillips had cultivated with them.”

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